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Full text of "Vitality in a business enterprise"

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uf JTlania 
Jltbrartra 




Sty? (gift of 

Dr. Ernest R. Bartley 



Digitized by the Internet Archive 
in 2013 



http://archive.org/details/vitalityinbusinOOkapp 



VITALITY IN 
A BUSINESS ENTERPRISE 



McKINSEY FOUNDATION LECTURE SERIES 

Sponsored by the 
Graduate School of Business, Columbia University 



Blough— Free Man and the Corporation 

Cordiner— New Frontiers for Professional 
Managers 

Greenewalt— The Uncommon Man 

Houser— Big Business and Human Values 

Kappel— Vitality in a Business Enterprise 



VITALITY IN 
A BUSINESS ENTERPRISE 



^ 6 - tS~C?& 

'PEL 

President, American Telephone and Telegraph Company 



FREDERICK R. KAPPEL 



McGraw-Hill Book Company, Inc. 

NEW YORK TORONTO LONDON 1960 



VITALITY IN A BUSINESS ENTERPRISE 

Copyright © 1960 by the Trustees of Columbia University in 
the City of New York. Printed in the United States of America. 
All rights reserved. This book, or parts thereof, may not be 
reproduced in any form without permission of the publishers. 

Library of Congress Catalog Card Number: 60-15688 
33290 



PREFACE 



It is a cliche to observe that the tasks of manage- 
ment are many and varied. Yet this truism has a 
special significance when applied to the manage- 
ment of large organizations— the general subject of 
the lecture series sponsored jointly by the Columbia 
Graduate School of Business and the McKinsey 
Foundation for Management Research, Inc. 

Each year for five successive years the chief execu- 
tives of major business organizations have been in- 
vited to choose, from the many phases of the general 
subject, that phase most important to them per- 
sonally. It is of more than passing interest that each 
lecturer has chosen to speak chiefly about people 
working together in large organizations. They did 
not select the issues of financing, of expansion, of 
vertical integration, of the range of the company's 
activities, or other topics so often viewed as the 



Preface 

central problems of managing large organizations. 
Uniformly, the lecturers have been interested in ex- 
cellence in the people who work in their companies, 
and consequently in those conditions and activities 
that foster that excellence. 

Since the corporation has given a new and longer 
time dimension to business, maintenance of the 
vigor of the enterprise as a continuing institution 
is a prime task for those charged with the direction 
of our large business firms. Many of the giants of 
twenty to thirty years ago have dropped from their 
commanding positions. Others have grown to re- 
place them. To lead successfully an organization 
through the vicissitudes of long-period changes re- 
quires an understanding of the concept of business 
vitality and of the actions and conditions that bring 
it about. These Mr. Frederick R. Kappel examines 
and explains. Excellence of personal performance is 
essential to maintain that special tone which means 
that a business is vital. While the mercurial quali- 
ties of vitality may sometimes be elusive, we know 
clearly what vitality is not. It is not a mass aggregate. 
It is a function of individuals, taken one at a time in 
their specific and unique personalities. 

To help attain a strong, creative, responsive or- 
ganization that functions effectively in periods of 
stress, that meets challenges firmly and that develops 



VI 



Preface 

solidly under conditions of success, the business 
manager does many things to help people grow in 
independence and effectiveness. Among those ac- 
tions given high priority by Mr. Kappel is the pro- 
motion of a "strong feeling of ethical responsibility/' 
This is a pivotal element in his concept of vitality. 
Others are the assignment of jobs that tax ingenuity 
from the very beginning, the delegation of responsi- 
bility, the provision of training in formal or on-the- 
job courses, and the matching of a man's abilities 
and interests with his duties. These are among the 
management methods, described with fresh insight 
by Mr. Kappel, that make the ideal of vitality a 
realizable human achievement. 

In essence, we have here a series of word pictures 
of the preoccupations of a man who is assigned the 
major responsibility for one of our great corpora- 
tions. Like the preceding McKinsey Lectures, these 
represent the thoughts of a chief executive during 
the period of his responsibility for his company and 
for the progress of the people associated with it. We 
find disclosed his major interests, the personnel is- 
sues that deeply concern him, and his ways of work- 
ing at the resolution of these issues. 

First presented to a group of prominent business- 
men and scholars on the Columbia University cam- 
pus, these lectures are now published for a wid^r 

vii 



Preface 

audience. Some additional thoughts, taken in part 
from the informal discussions that followed each 
lecture, have been added to the material formally 
developed and presented by Mr. Kappel. 

Courtney C. Brown 

Dean 7 Graduate School of Business 

Columbia University 



viii 



FOREWORD 



This book is based on the McKinsey Foundation 
Lectures which I was invited to give in 1960 by the 
Graduate School of Business of Columbia Uni- 
versity. I am grateful to the sponsors and organizers 
of these lectures, as well as to my friends in other 
businesses who discussed with me, after each lec- 
ture, the points I had made and their relevance to 
conditions in other industries. I would also like to 
acknowledge my continuing debt to my associates 
in the Bell System with whom I have both discussed 
and worked on these problems for many years. 

Frederick R. Kappel 



ix 





CONTENTS 


Preface 


V 


Foreword 


ix 


A Concept of Vitality 


1 


Goals That Build the Future 


35 


The Spark of Individuality 


69 



XI 



A CONCEPT 

OF 

VITALITY 



Vitality is the power a business generates today 
that will assure its success and progress tomorrow. 

A business operates at any point in time with the 
financing, the equipment, the products, the earn- 
ings, and above all the people it has available. Each 
of these is a constantly changing factor, and their 
sum total at any given moment is the product of 
changes in the past. The constant responsibility of 
the head of a business is to do today those things 
that will build strength for the future. In building 
that strength, I believe, a business can create for 
itself a vitality that will profoundly affect each of 
many tomorrows, from a day to a generation in front 
of us, and that may well spell the difference between 
success and failure for the business, for the com- 
munities in which it works, and for the nation. 

As I see it, leadership that devotes itself wholly 
to operating successfully in the here and now— es- 
sential as this is— will not measure up to its total 
responsibility. Leadership is equally called on to 

3 



Vitality in a Business Enterprise 

build vitality for the long pull. And current success 
offers no assurance that this is being done. 

Quite the contrary. A company may be in the full 
bloom of current prosperity, but dying on the vine 
as far as its power to build the future is concerned. 
On the other hand, a business that is struggling to 
survive may well be building vitality, in that very 
process, for a hardy and flourishing future. 

To succeed over the long run, a business must 
generate vitality under all the circumstances that 
confront it, not only in times of crisis but just as 
much under conditions of success that may have 
persisted through many years. 

In the Bell System, during the thirty-six years I 
have been in it, we have faced almost numberless 
situations of stress. They have included legal ac- 
tions, strikes, and all kinds of natural disasters af- 
fecting the rendering of telephone service; and on 
a broader scale, severe depression, war, prolonged 
shortages of essential materials, the squeeze of infla- 
tion on the one hand and tight regulation on the 
other. Conditions like these provide the more dra- 
matic challenges to management. In addition to 
testing our ability to operate successfully at the 
moment, they call forth a great deal of effort to build 
for the future. However, I believe that building 
vitality when things are going along relatively well 



A Concept of Vitality 

is equally a test of leadership, and may be in some 
respects even more exacting. 

What makes a vital business? Vital people make 
it. The very sense of the word vitality tells us it is 
wholly an attribute of human beings. It is not to be 
found in things, in machines, or dollars, or material 
resources of any kind. Vitality is something people 
demonstrate through sustained competence; through 
creative, venturesome drive; and through a strong 
feeling of ethical responsibility, which means an 
inner need to do what is right and not just what one 
is required to do. 

As I look at the world, America's need for the 
human qualities summed up in this word vitality 
seems very clear. Not only the economic welfare of 
the country is at stake, but our whole philosophy 
of how people can build and live a good life. 

We in business are doing more than earning 
profits. We are doing more than furnishing goods 
and services. We are producing more than material 
wealth. We are working to help build a political and 
social system different in important respects from 
any other the world has ever known. The lives of 
our heirs will depend in great measure on how suc- 
cessful we are. The countries of the world are watch- 
ing our progress as a nation. The emerging nations 
of Asia and Africa are looking for models on which 



Vitality in a Business Enterprise 

to fashion their own growth. Our whole Western 
society in all its aspects is engaged in a decisive 
struggle with the power of an alien philosophy, one 
that would destroy everything we value. The chal- 
lenge to us is to demonstrate that the initiative of 
free men can continue to build strength for the 
future that will assure the prospect of freedom. 

In this setting, business vitality is not merely de- 
sirable, it is an obligation. It is not too much to say 
that beyond meeting the immediate requirements 
of day-to-day operations this is the first and foremost 
responsibility we have. Everything else will flow 
from it. 

There are numerous forces in American society 
today that tend to make the task of business man- 
agers more difficult. Managing a business would be 
much simpler if all these forces served to strengthen 
vitality in people as they do their work. 

But they don't. 

Specialization, necessary as it may be, can seri- 
ously weaken an individual's understanding of his 
total responsibilities as a human being. "Let the 
government do it" thinking encourages forms of 
state action that must inevitably lower, in my judg- 
ment, the reservoir of individual vitality. Parental 
and community pressures on schools sometimes re- 
sult in the acceptance of average or mediocre stand- 



A Concept of Vitality 

ards of performance as "satisfactory." Some union 
pressures on industry all too frequently have the 
same consequence. 

In such ways, I think that much that has hap- 
pened during the past three decades has worked 
against vitality in the lives of many people. Vitality 
in people should be the responsibility not only of 
the business that employs them; it should be a 
prime concern of government, unions, churches, 
schools, and other influential institutions. No re- 
sponsible segment of our society can ignore the 
obligation to do what it can to stimulate vitality. 

Where then do we who work in business begin? 
In my belief we must begin with the people in each 
of our businesses, with individual men and women. 
We must draw the more vital people into the more 
responsible spots. We must help grow vitality in 
all people where they are. Although the numbers 
may be large, as in my own business, it is still neces- 
sary to work with individual men and women— one 
person at a time. 

My business is blessed with many people of 
wonderful vitality. I know many of them well. I also 
know some who lack vitality or have lost it. Through 
the years I have often asked myself: Why does one 
person have it when another does not? Where did 
it come from? Why does it grow in the one and fade 



Vitality in a Business Enterprise 

in the other? How much is inborn and how much 
is acquired? 

Out of this kind of speculation and many years 
of observation, I have developed some convictions 
in these matters. 

I believe the person who is capable of bringing 
a plus of vitality to a business already has some of 
this quality well developed by the time he comes to 
work. It may be to some extent inborn; it certainly 
has been developed by early family and school ex- 
periences. He has used his opportunities well. He 
has made a habit of the willingness, the desire, to 
dig and strive. He has already competed for what 
he wanted, and learned to enjoy the effort. His own 
life is important to him. What he does with his life 
in the way of achievement makes a difference to 
him. He feels deeply accountable for using his life 
well. 

This has nothing to do with a person's relative 
ability, or with the external recognition he may 
gain. This is something internal, a matter of char- 
acter. It follows, I think, that a business that always 
looks carefully for this quality of vitality in the 
people it employs, and weighs it importantly in 
promoting them, will grow strong more quickly and 
will keep building more strength for the future. 

However, I also believe that there is some po- 

8 



A Concept of Vitality 

tential for growth of vitality in nearly all people. In 
some the potential may be slight, but it is there. A 
business can operate in ways that will contribute to 
the growth of vitality in the people who work for it. 

It can provide opportunities and incentives for 
work that is meaningful to the man who does it. 

It can set demanding and exciting goals. 

It can encourage relationships that are construc- 
tive and stimulating. 

It can support attitudes of independence and self- 
reliance. 

It can identify the individual with the kind of 
business character and ethics that will help maintain 
his standing as a valuable and respected member 
of his community. 

It can demand his best at all times. 

A business can do all these things, but will it do 
them? Will it do them over a long period of time? 
This is the test of institutional vitality: is the busi- 
ness actually doing the things that build vitality in 
individual people? Do these actions get through to 
individual people and make a difference in their 
work and in their lives? 

Before we can answer questions like these, we 
need some basis for judging the degree of vitality 
in the business. What are the signs that vitality is 
growing or waning? Symptoms of loss of vitality 



Vitality in a Business Enterprise 

develop so slowly that many people may not be 
aware of them. By the time the signs are clear and 
unmistakable, the loss may be so great that recovery 
is impossible. I shall discuss here several signs that 
to me are especially significant because they can be 
seen while a business is in a period of success. 

The first is when people cling to old ways of work- 
ing after they have been confronted by new situa- 
tions. It is human nature to rely on what has worked 
in the past. This seems perfectly sound and reason- 
able. But we also know that the ways of working 
that make a business successful may not keep it 
successful. 

Here is an example from the telephone business. 
In our work the use of telephone exchange names— 
UNiversity, PLaza, and so on— is ingrained. How- 
ever, as the total number of telephones increases, 
using letters in individual numbers will become im- 
practical. We now have about 540 usable exchange 
names and some 200 potential area codes. This is 
not nearly enough for the years ahead. Using both 
letters and numbers, we would run out in the mid- 
1970s. 

The solution is to go to an all-number plan. UNi- 
versity 5-4000, for instance, will become 865-4000. 
This change will greatly increase the quantity of 
telephone numbers and area codes. We have al- 



io 



A Concept of Vitality 

ready done this in some places and there will be a 
gradual conversion to this system throughout the 
country. 

Beside the job of familiarizing customers with all- 
number calling, we shall have to change many of 
our work habits. In fact, we are already being forced 
to shed old ways of thinking. It may be something 
of a wrench, but my point is that wrenching away 
from past thinking and procedure is so often es- 
sential to vitality. And our ultimate goal is exciting. 
All-number calling is one step toward global dialing 
of telephone calls. 

Clinging to old methods and ways of working 
will not solve the problems that lie ahead of the 
telephone business. The Bell System now serves 
nearly 60,000,000 telephones, of which 97 per cent 
are dial-operated. By the end of 1960 nearly 22,000,- 
000 customers will be able to dial long distance calls 
to points all over the country. These figures are so 
large that one might think we had already worked 
out all the techniques we need. Nothing could be 
farther from the truth. Last year alone we added 
3,298,000 telephones to the system we serve, a 
larger increase than in any year in history. Before 
the end of this century, and perhaps sooner than 
that, it is possible that the number of telephones in 
the United States will be tripled. We shall not be 

n 



Vitality in a Business Enterprise 

able to handle this kind of growth by looking only 
backward for guides to action. 

Nor is growth the only factor that requires change 
in ways of thinking and working. As we in the Bell 
System look around and look ahead, we see all 
manner of developments testing our ability to adapt, 
to modify, to create new approaches and new meth- 
ods. Increasing competition in the communications 
field demands our competitive response. Today, in 
a business that in past years operated without com- 
petition in the usual sense, we find it perfectly nat- 
ural to think in competitive terms. Further, there 
is increasing variety in the forms of communica- 
tions—telephony, television, telemetering, the trans- 
mission of data of all kinds through the nationwide 
communication network. The spread of dial service 
for long distance as well as local calling takes away 
many of the personal contacts we had with our cus- 
tomers in earlier years, so we must find new ways 
to demonstrate effectively that telephone people 
have the same personal interest in serving their cus- 
tomers that they have always had. Again, there is 
good likelihood that in the future we will be using 
satellites as well as earthbound cable and radio sys- 
tems for world-wide telephony. These are only a few 
examples of how we are called on to keep our minds 
and methods in pace with ever-changing needs. 



12 



A Concept of Vitality 

One way to find out whether an organization is 
relying on outworn methods is to listen to people as 
they talk about their jobs. 

Do they feel that their functions and responsibili- 
ties are pretty well established by practice or custom? 
Do they see their jobs as merely doing what their 
predecessors did, only more efficiently if possible? 

Or do they feel they have a certain latitude— or 
obligation— to shape or alter their activities to meet 
the current situation? 

Is the effort going into determining why things 
can't be done, or in finding out how they can be 
done? If people are not trying to do the latter, then 
vitality is slipping. 

A good manager will recognize that the traditions 
of an organization serve many important purposes. 
When they inspire people, that is all to the good. 
But unless progress becomes the prevailing habit, 
tradition will be misused. People will lean on past 
wisdom and experience to the point where they 
develop none of their own, and take little or no 
initiative. Certainly, by innovating, we do stand to 
lose some traditions that have had value in the past. 
But right here is one of the tests of leadership: to 
know the differences between a tradition that is still 
good, one that needs to be modified, and one that 
should be abandoned altogether. Those who are to 

13 



Vitality in a Business Enterprise 

lead adequately in these times not only need to 
know the differences, but they need the fortitude to 
act on what they know, painful as this sometimes is. 

This then is our continuing concern as business 
managers: We dare not ignore the methods and 
skills that have demonstrably paid off. We cannot 
afford to lose the abilities we have practiced so long 
to acquire. But we must also recognize— and here is 
the challenge— that no matter how successful we 
have been, not all the methods we have learned will 
be useful for continuing success. Which ones will 
we need for the future, and which shall be suspect? 

A second symptom of declining vitality is the 
failure to define new goals that are both meaningful 
and challenging. Every business needs something 
to strive for, something to become, something to 
achieve, goals to reach. What kind of a business 
should it be? What should be its role in the industry 
or the economy? What position is it attempting to 
attain? 

I believe that goals must be constantly held up to 
any organization, and looked at as frequently as a 
pilot consults his chart. But if we always repeat the 
same language, even though the meaning was origi- 
nally crystal clear, the words we use will eventually 
lose their force. For example, a fundamental state- 
ment of Bell System policy was enunciated more 



14 



A Concept of Vitality 

than thirty years ago: to provide the best possible 
service at the lowest cost consistent with financial 
safety and fair treatment of employees. This was 
fresh and influential language at the time and it has 
had great constructive influence in our business. 
But we haven't felt that we should say the same 
words over and over by rote. They would cease to be 
meaningful. Besides, in the world of today we have 
additional important things to say about our policy: 
for instance, that good profit and good service per- 
formance cannot be separated. 

Stereotyped language about goals has the same 
infirmity as stereotyped language about anything 
else. It has no impact. It goes in one ear and out the 
other. It does not provoke thought. Rather, it drains 
away the meaning of the goals, and leaves people 
wondering what they really are. Further, if we are to 
have vitality in an organization, it is important that 
people all through the organization think actively 
about the company's broad purposes. But we shall 
offer them no encouragement to do this if we end- 
lessly say the same things in the same old way. 

An even more serious difficulty is that everybody 
can get so involved in making a good current show- 
ing that the overall purposes of the activity are lost 
sight of. People become completely absorbed by 
immediate aims: the performance chart in the sales 

15 



Vitality in a Business Enterprise 

manager's office, the latest variance between stand- 
ard and actual costs, the market test in Timbuctoo. 

These are important, I know. I do not belittle 
them. They are the lifeblood of any business in its 
current operations. But it is possible that they are 
the lifeblood of a business that is losing its course. 
I am simply saying that as managers, particularly 
top managers, give immediate goals their total at- 
tention, they are likely to forget where the whole 
business is going. When this happens, vitality is in 
jeopardy. 

A third and closely related sign of danger is a 
decline in what I call "reflective" thinking, as dis- 
tinguished from "action" thinking. 

A business needs plenty of "action" thinking 
every day. This is the kind of thinking that is con- 
cerned with setting up the plans, making the deci- 
sions, keeping the pace brisk and challenging, exer- 
cising the controls required for successful operation 
under the prevailing pattern. 

I use the term "reflective" thinking to cover the 
mental activity required to ask searching (and some- 
times embarrassing) questions about the adequacy 
of the current operation. This kind of thinking can 
be disturbing to some men at the center of success- 
ful action, because they may see it as dealing with 
remote abstractions, with theories of management 

u 



A Concept of Vitality 

that seem impractical, and with visionary specula- 
tions about the future. The success of a business 
today, largely based on action thinking, gives the 
opportunity to build vitality but it doesn't do the 
building. For that, reflective thinking is essential. 

Looking at the business of the Bell System, I 
know we can reach our immediate goals without a 
great deal of reflective thinking. But I doubt that 
we can build vitality for tomorrow without a lot of 
it, for this is the way we get deeper understanding 
of our problems. I make this point because I believe 
the pressures to meet the problems of the day tend 
to discourage reflective thinking, and when this hap- 
pens to a business it will surely lose vitality. 

A fourth warning signal is the growth of institu- 
tionalism. By this I mean the notion that the busi- 
ness has an existence of its own apart from the 
people who comprise it. In its extreme form, people 
in the business act as if they believe that the business 
was always successful and always will be, and that 
this success is somehow a natural phenomenon that 
will last forever. I dare say there are some managers 
in the Bell System who assume that ours has been 
a straight line of development from Alexander 
Graham Bell's invention right down to the present. 
The fact is that our business like others has made 
errors, suffered bad times, struggled through crises, 

17 



Vitality in a Business Enterprise 

and needed the brains and dedication of its people 
during every minute of its life. 

Of course, if you ask people about this, they will 
deny that they think current success guarantees 
future success. But judging from certain attitudes 
and behavior, I think that in a good many indi- 
viduals, perhaps unconsciously, some such notion 
exists. The danger to a business comes from the 
logical extension of this idea. If the business is 
"bigger than all of us," in this sense, not much that 
any individual does or fails to do will matter a great 
deal. When people develop this kind of attitude, I 
would say their vitality has just about reached the 
vanishing point. 

A fifth symptom of lowered vitality appears 
when a business gets the reputation of being a 
secure and stable outfit, but not a venturesome one. 
The company may be strong and successful, in the 
prime of life. But it is more occupied with maintain- 
ing than with developing. It appears to have arrived 
at a destination rather than to be moving toward 
one. Such a business needs plenty of brains and 
talent just to keep going. Yet the general "feel" and 
reputation of the company is one of competence 
and character in established fields rather than one 
of a business that is pursuing expanding opportuni- 
ties. 

18 



A Concept of Vitality 

This will have a marked effect on the company's 
ability to get the kind of new blood it most needs. 
Certainly most young men entering a business want 
to tie up with concerns they consider successful. 
They all want "a future." They are all looking for 
"opportunity." But the fact remains that the busi- 
ness that is known to be constantly creating and 
innovating will attract the best minds and excite 
their eager participation. On the other hand, the 
business that is known mainly as stable, solid, and 
set in its ways will easily attract more people than 
it needs of the kind who will keep it in the groove. 
It will have trouble, however, in getting and holding 
men who have the ability, the turn of mind, the 
determination to pioneer. In short, the less vital 
business will get the less vital people. And so, as 
time goes on, its problem will be compounded. 

A sixth danger signal can be seen in the way old 
wisdom is passed on to new people. Not only do 
many older managers have a tendency to adhere too 
rigidly to the ideas, approaches, and methods that 
have produced success in the past, but they also 
pass this kind of thinking along to young managers. 
Nothing could be more natural, and of course it is 
all done with the best will in the world. The old pro 
is trying to be as helpful as he can. He wants to 
steer his junior away from the pitfalls that lie in his 

19 



Vitality in a Business Enterprise 

way, even though some experience with the risks 
of life is just what the young man really needs. 

I doubt if we could prevent senior managers from 
trying to pass their wisdom along even if we wanted 
to. The trouble is, the attitude that goes with the 
wisdom too often boils down to this: "There is one 
right way to run this business and we know what it 
is. Your task is to keep your eyes and ears open and 
your mouth shut. If you do as you're told and watch 
the way things are done for several years, you too 
will learn the secret." 

The young person quickly understands that his 
role is to soak up methods and procedures un- 
critically. He sees that he is not expected to con- 
tribute anything new, at least for years, and by then 
his ability to venture may be gone forever. 

Contrast this with the senior manager who says 
in substance: "You have a lot to learn in the ways of 
this business. There is no method that is best under 
all conditions and at all times. We don't know it all 
yet and we don't suppose we ever will. We expect 
you to learn, but from the outset we also expect you 
to contribute something to new and better ways. 
You are required to produce results on your assign- 
ment, but you have room for proposing ideas that 
seem useful to you, and we expect you to do this." 

The examples I have given are greatly condensed. 

20 



A Concept of Vitality 

But the difference is real. The second message will 
strengthen the way younger men approach their 
jobs and can increase the vitality of the whole 
business. The traditional message, however, will 
reinforce any tendency to perpetuate outworn meth- 
ods. It will incorporate the existing code into the 
thinking of each new generation, and this will con- 
stitute a down payment on decayed future leader- 
ship. 

It is not easy to train managers to welcome sub- 
ordinates as critics and contributors, rather than as 
followers of the established patterns. We in the 
Bell System freely confess that we are not as good 
at this as we would like to be, but we are working at 
it and we are doing better. First, the manager must 
know that the business truly wants new ideas and 
that they are to be welcomed. Second, he can be 
helped, through training and coaching, on how to 
respond to new ideas that his subordinates present. 
Third, he should clearly understand that his atti- 
tude toward new ideas will be given important 
weight in the company's judgment of his own per- 
formance. 

To conclude this list of some of the symptoms 
of loss of business vitality, let me cite one that is 
sometimes difficult to detect but powerful in its in- 
fluence. This is low tolerance for criticism, with 

21 



Vitality in a Business Enterprise 

such penalties on thoughtful and responsible critics 
that criticism is stifled in the whole organization 
and all independent thinking is discouraged. This is 
an age-old problem and critics never lead a rosy life. 
But vitality demands that we have them and listen 
to them. 

Part of the problem is that the most helpful and 
responsible critics are inside the business and "in 
the know/' Like any other good thing, a business 
can get too much criticism; but it needs some and 
it needs to be on the alert for signs that criticism is 
being stifled. 

One of the signs of low tolerance of criticism is 
in the language used in internal reports. It becomes 
improper to suggest that something has been or 
might be done wrong. Recommendations, for ex- 
ample, will not say, "We must improve such and 
such." They will say, "We must continue to im- 
prove such and such/' After all, we mustn't give 
the idea that everything hasn't been improving 
right along. Or again, instead of saying that we are 
not developing enough middle managers, a report 
will say, "There is room for improvement in our 
development of middle managers." This is safe 
enough because there is room for improvement in 
almost anything without any hint of criticism of 
the past. The situation can go so far that any overt 

22 



A Concept of Vitality 

criticism of company affairs is viewed as out of 
order. 

Since searching and critical examination of the 
status quo is the best basis for launching a new 
idea or proposing an innovation, men who have 
constructive criticisms to make must be encour- 
aged. I believe the man who wants to take excep- 
tion to the way a job is being run, and stands up to 
his responsibility to insist that he be heard, will 
usually get the opportunity to present his case. In 
my own experience, I have sometimes been slowed 
down or sat upon. But to the everlasting credit of 
the organization, I have always found someone on 
the lookout for the best I could offer and more. 

I have reviewed here some of the signs that indi- 
cate loss of vitality in a business. They are symp- 
toms I have observed in my own experience. They 
are real and they are damaging. But they are not 
inevitable. Where management is alert and on the 
job, they need not get a start. So it is important to 
detect signs like these when they are small and 
faint, when the damage has been small, and the 
chance for reversing the trend is good. 

As a practical matter, however, I believe we 
should proceed on the assumption that these signs 
of waning vitality reflect normal tendencies in hu- 
man organizations, and that such tendencies are 



23 



Vitality in a Business Enterprise 

always at work on some scale whether we can see 
the signs or not. This is something like the way a 
wise man looks at his health. If he waits for signs of 
illness before he does anything about his health, he 
may have waited too long. The forces making for 
ill health are general and apply to everybody. To 
the extent that we understand them, we should try, 
without making an obsession of it, to live all the 
time so as to minimize the chance that a serious 
symptom will ever show. I believe this is the attitude 
we should take in a business. Building vitality is 
something we should do all the time, not just when 
we are afraid we are losing it. 

Let us turn now to the constructive side, to some 
of the things we can do, the things that help to 
build vitality. One such is technical research. The 
progress and prosperity of the United States are 
closely linked with the great expansion of human 
knowledge during our generation. However, I be- 
lieve we are only at the beginning of this vast thrust 
forward in man's capacity to control his environ- 
ment. No less important, we are only beginning to 
glimpse the potential effect of technical research 
on our ways of doing business. 

Research is wonderful and fascinating because it 
turns up new knowledge that leads to new products 
and, in the case of the Bell System, to new and im- 

24 



A Concept of Vitality 

proved services. But it is just as wonderful in the 
way it keeps upsetting people who want to follow 
traditional paths. Research is born out of dissatis- 
faction with what we already know and are already 
doing, and in turn, the new knowledge it brings us 
requires that we continually re-examine and change 
existing ways. 

Research sets off chain reactions. In the tele- 
phone business, for example, new developments 
flowing out from the laboratory continually chal- 
lenge the imagination and ingenuity of manufactur- 
ing people. New kinds of apparatus have to be made 
by new machines, and long before they are off the 
production line, they require new concepts by the 
operating telephone companies. They must be in- 
stalled by new methods, operated by new methods, 
maintained by new methods. They permit new serv- 
ices that aim at new markets; in fact, they make us 
change our whole thinking about what our markets 
are. They lead us into new and often perplexing 
questions involving rates and regulation. The rami- 
fications are endless. The effect on vitality is pro- 
found. 

Another way of stimulating vitality and learning 
how to manage the business better is the modern 
business practice of asking people to wrestle with 
tough, important special assignments. Like man- 



25 



Vitality in a Business Enterprise 

agers in many other industries, we in the Bell Sys- 
tem do a lot of this and we have found great value in 
it. Among other things, people charged with such 
assignments find themselves outside the context of 
their regular jobs, they have to face problems they 
have not faced before in the same way, and they get 
to see both the business and themselves in a new 
light. 

I first had the benefit of such assignments many 
years ago. Hundreds— I dare say thousands— of Bell 
System managers have had similar experiences 
through the years. Many are on special assignment 
right now. Sometimes it is an individual assign- 
ment, sometimes we set groups to work. Here are 
three recent examples of group effort: 

We thought we ought to take a very critical look 
at how we were organized to provide communica- 
tion services to other large businesses. We charged 
a group to examine the matter from stem to stern. 
How was the job being done? Who was doing it? 
How were the responsibilities assigned? What did 
our customers have to say about us? We charged the 
group further to think out what we ought to do and 
come up with recommendations. 

So they did all these things. I am proud to say, 
too, that they made their recommendations explicit 
and forthright. They did not say, "There is room for 



26 



A Concept of Vitality 

further improvement in our service to large in- 
dustry/' They said, "We must improve our service, 
we must get on the ball fast, and here is the way we 
think the job should be done/' 

A second example concerns a thorough study of 
telephone earnings. Looking ahead to a future that 
seems certain to ask much more of us than the past 
ever has, we felt the need to make a broad and deep 
analysis of many factors bearing on the level of 
Bell System profits. Again we assigned the job to a 
study group, or task force. They tackled such ques- 
tions as these: 

What has been the range of profit experience in 
other businesses? 

What relationships are there between levels of 
profits and the progressiveness of particular in- 
dustries? 

How does profit affect corporate citizenship, em- 
ployee welfare, technological advance? 

What are the real social and economic differences 
between regulated and non-regulated industries, 
and what are the similarities? 

What basic principles of regulation should we 
advocate as being most in the public interest? And 
where and how do we state our beliefs so that they 
will gain acceptance? 

There were other questions, too. We asked a lot 

27 



Vitality in a Business Enterprise 

of our task force, and they asked a lot of themselves. 
As a result, they have generated a body of thinking 
that in my judgment will have constructive influ- 
ence on the future of regulated industry in the 
United States. 

This general method has been used at one time 
or another in every one of our departments and 
companies to examine all sorts of questions. We 
find that the systematic accumulation of informa- 
tion is a large step in the direction of getting action 
on certain kinds of matters. Until good information 
and data replace scattered individual opinion, it is 
far more difficult to touch off constructive action. 
One opinion is as good as another until more care- 
fully gathered facts take their place. 

I am sure many other companies have followed 
this same general method in gathering knowledge. 
However there is one refinement that is a useful ap- 
proach to help an organization study various situa- 
tions affecting its own vitality. 

Let us say for example that the question is: "How 
much freedom to manage their own jobs do man- 
agement people really have? We talk a lot about 
giving them enough elbow room, but in practice 
how are we actually doing?" 

We pick a group of operating managers for tem- 
porary assignment and charge them with the respon- 

28 



A Concept of Vitality 

sibility to find out where we stand on this "free- 
dom to manage" and to recommend how we might 
do better. We provide staff help for the study and 
give the group of operating men enough time to 
conduct an investigation and reach a conclusion. 

The men split into two-man teams. Each team 
conducts a study in both of the departments or areas 
where they are managers themselves. In each loca- 
tion, the man whose regular job is not in that area 
is the interviewer or chief investigator. Each team 
then writes and documents its own report. Then the 
entire group of teams meets to compare notes and 
write a consolidated report. The members of the 
study group are often invited to discuss their report 
with various Bell System operating organizations. 

One advantage of this procedure is that the biases 
of an observer looking at his own situation are 
minimized by making the "visitor" on the team 
responsible, while the local man, who knows the 
situation intimately, makes sure they get the whole 
story. Another practical advantage comes from using 
men who know from their own experience how to 
add up the information they gather; we don't have 
to depend on information accumulated by people 
who are strangers to the situation. A third benefit is 
that the results gain wider acceptance because they 
represent the judgments of men recognized and 

29 



Vitality in a Business Enterprise 

respected by the organizations that have to act. 

This particular inquiry resulted in considerable 
action to give managers more real authority in im- 
portant areas such as salary administration, ap- 
praisal of subordinates, and job assignments. 

Another question we have looked into by this 
method is how to get a newly appointed manager 
to function effectively. We knew from other studies 
that new managers go into their jobs with high feel- 
ings of success and expectation, but in many cases 
these positive feelings soon decline sharply. We 
wanted to know why, and what we could do about 
it. This is of unusual importance at a time when 
we are averaging 4,000 new appointments to man- 
agement a year. 

Attitude surveys had shown us that the low point 
in a new manager's confidence and enthusiasm 
usually came between one and two years after his 
first management job. At the time of his promotion, 
as you might expect, he would be proud and ex- 
cited, feeling his talents had been recognized. 
Shortly after he took over his new assignment, he 
would encounter questions and problems with 
which he felt incapable of dealing. He frequently 
found that his authority was more limited than he 
had thought it would be, and that he was in a "no 
man's land" between higher management and oc- 

30 



A Concept of Vitality 

cupational groups. The interviewing teams were 
able to show us that a little thoughtful work to 
prepare a new manager to handle new problems, 
and to get him acclimated to his new role, can sub- 
stantially reduce his loss of confidence. 

Now when you are dealing with questions of the 
kind I have mentioned, the recommendations of a 
study group are not going to settle the matter once 
and for all. In no sense do we get blueprints. Also, I 
will say frankly that sometimes action seems slow 
in forthcoming. Nevertheless I am persuaded that 
the benefits are real. This kind of effort sharpens 
and broadens and deepens awareness of the ques- 
tions that are studied. It communicates the idea 
that the company is not sitting back and accepting 
things as they are. It supplies evidence that some- 
times upsets preconceived notions, and sometimes 
supports and strengthens intuitive beliefs. It builds 
up pressure for action— gives us a firmer basis for 
action than we might otherwise have— and makes 
it untenable for people to sit tight and not act when 
action is called for. These are all outcomes that af- 
fect vitality. 

In addition, there are important benefits to the 
managers who do the work. As in the case of people 
on the task forces, they get to see many things dif- 
ferently from the way they have seen them (or failed 



31 



Vitality in a Business Enterprise 

to see them) before. They develop new ideas about 
how they can contribute more to the vitality of their 
companies. They grow in vitality themselves, and so 
too, I believe, do at least some of the people they get 
involved with in this kind of work. Many of them 
have said, in fact, that the experience was one of the 
most valuable they have ever had, and far superior 
to any training course. 

The common thread in all these activities I have 
been speaking of, and the thought they lead me to, 
is really very simple. As I look at research and tech- 
nical development, the work of the task forces, the 
probing of the interviewing teams, and other similar 
activities, it seems to me I can see a common de- 
nominator in all of them. They are all efforts to 
examine ourselves and our work in a critical, exact- 
ing sort of way, and on the basis of that self-examina- 
tion, to come up with new concepts, new ideas- 
reflective thinking, as I called it earlier— that will 
continually refresh our vigor. 

Applying this now to the negative influences— the 
warning signals— that I have listed, I believe that if 
there is one key to building and increasing vitality, 
it is the disposition of all management people in a 
business to be ever alert, searching, and concerned 
about these danger signals. Every manager must 
develop active habits and ways of watchfulness, and 



32 



A Concept of Vitality 

on that foundation, think through for himself the 
kinds of ideas and actions needed for strength. My 
own part, my responsibility, is to encourage such 
watchfulness in every way I can, and more than that, 
to insist on it. 

Perhaps it will be said that watchfulness is a hard 
thing to insist on. That is true. However, particular 
methods of self-examination are things I can insist 
on, and these build watchfulness. To do this is only 
a beginning, I know, but we have to start somewhere 
and here it seems to me is the essential starting 
point. To paraphrase a familiar maxim, eternal vigi- 
lance is the price of vitality. 

At the start of this chapter I defined vitality as 
something people demonstrate through sustained 
competence, through creative, venturesome drive, 
and through a strong feeling of ethical responsibility. 
In an economy that is growing and changing as ours 
is, we cannot now describe or even imagine how the 
vitality we generate today will affect the future. But 
I think we may safely predict that if we can sustain 
and increase vitality in business leadership and all 
business people, the society in which our children 
live will be better, happier, and wiser. This is a goal 
worthy of our very best. 



33 






GOALS 
THAT BUILD 
THE FUTURE 



The goals of a business give the people who work 
in it the direction they need to increase their vigor 
and their strength. Unless the business sets demand- 
ing and exciting goals, it runs a heavy risk of losing 
vitality. This is an area where people in top man- 
agement positions have special responsibilities, for 
there is a close relationship between a company's 
major goals and the decisions its officers are called on 
to make. If these goals and decisions fail to stimulate 
others in the organization, and set them moving and 
working in ways that build vitality, then there is 
something missing at the top. 

Looking back at the history of the telephone busi- 
ness, I am convinced that certain basic goals and 
key decisions have had great effect in sustaining the 
vigor of the Bell System, and in promoting what- 
ever long-run success we may be judged to have 
achieved. 

First let me say just what I mean when I use the 
phrase "goals that build the future." In general, a 

37 



Vitality in a Business Enterprise 

goal is any kind of aim or objective. But in the sense 
that I am using the word, a goal is something pres- 
ently out of reach; it is something to strive for, to 
move toward, or to become. It is an aim or purpose 
so stated that it excites the imagination and gives 
people something they want to work for, something 
they don't yet know how to do, something they can 
be proud of when they achieve it. 

Certain larger goals have particular value because 
they give meaning to other aims. In the Bell System, 
for example, it is an important aim to find a better 
way to splice a telephone cable, or a faster way to 
handle a telephone call. But the work we do to ac- 
complish these things takes on much more meaning 
when we are moved by some deeper or broader pur- 
pose, such as the kind of job we want to do for the 
nation, the kind of business we want to be. The 
goals that build the future are the goals that estab- 
lish these broader purposes. They relate the near to 
the far, the present to the future, the individual to 
the business, the interests of the business to the wel- 
fare of the country. So they have great social mean- 
ing. 

In order to see the real significance of goals that 
build the future, I think it is helpful to look back. 
In two critical periods of our business it was under 
the leadership of a man of great foresight who also 



38 






Goals That Build the Future 

had unusual ability to act as he saw the future would 
demand. There is no question that the character of 
the Bell System owes a great debt to this man, 
Theodore N. Vail. I do not want to convey the im- 
pression that one man did everything. There were 
many other contributors. Nevertheless, I believe 
most students of business history would agree that 
Vail was a man whose imagination and sense of the 
future were decisive in the development of our com- 
pany. 

He was the first general manager of the first tele- 
phone company in 1878. He left the telephone 
business in 1887 and returned twenty years later to 
serve as head of the American Telephone and Tele- 
graph Company from 1907 to 1920. The present 
make-up of the Bell System— a family of operating 
telephone companies; a manufacturing arm, the 
Western Electric Company; a research arm, Bell 
Telephone Laboratories; and a parent company, the 
American Telephone and Telegraph Company, 
which maintains a central staff and operates the in- 
terconnecting long distance network— this concept 
was largely worked out under his leadership. But his 
great achievement was that he envisioned a bound- 
less future, foresaw what would be needed in order 
to drive ahead, and set others working according to 
his vision. I say 'Vision" because he set goals that 

39 



Vitality in a Business Enterprise 

must at the time have been considered visionary, 
but which, as we see them now, have been largely 
achieved. 

In effect Mr. Vail said: "We will build a tele- 
phone system so that anybody, anywhere, can talk 
with anyone else, any place in the world, quickly, 
cheaply, and satisfactorily." He said it for years and 
he said it in many different ways. He said it in the 
face of staggering technical problems, when in fact 
the available technology was insufficient to permit 
fully satisfactory service even over short distances. 
To contemplate at that time the physical and human 
resources required to reach such a goal was a fan- 
tastic dream. Yet it was not an unrealistic dream. 
What was then foreseen is now do-able, and we are 
doing it. 

The point here is that a goal that builds vitality 
and works for future success is not a wishful fancy. 
It is not a speculation. It is a perfectly clear state- 
ment that you are going to do something. I would 
say that part of the talent or genius of the goal-setter 
is the ability to distinguish between the possible and 
the impossible— but to be willing to get very close 
to the latter. Another equally necessary ability is to 
know how to set action going and what direction to 
give it. 

The big goal I have described set the stage for 

40 



Goals That Build the Future 

others and generated decisive action in several fields. 
I shall mention three. 

Every advance in telephony, from the beginning 
right up to now, has been based on ever-increasing 
technical competence. But more than that, succes- 
sive advances have needed new knowledge. Just do- 
ing a better job of using existing knowledge could 
never have produced, by itself, the kind of progress 
that has been made. Yet back in the last century and 
in the early years of this one, it wasn't the usual thing 
for a business to go into basic research. More likely, 
you did all you could with what you had, and kept 
your eyes open for what the scientists at the uni- 
versities might have to offer. 

I think this might have been our course— except 
for one thing. This was the goal, the big dream 
stated without equivocation, the dream of good, 
cheap, fast, world-wide telephone service for every- 
one. With this in the picture we had only one 
choice; we were compelled by our own goal, and the 
high order of importance placed upon it, to go into 
basic research on a scale sufficient to make the 
dream a reality. Today basic research in our Bell 
Laboratories is world-renowned and nothing in our 
scheme of things outranks it in importance. 

Second, the goal of universal service meant a 
single interconnected network. This sounds self- 

41 



Vitality in a Business Enterprise 

evident today, but the fact is that it was not easy to 
achieve. The business of the Bell System was struc- 
tured initially on the basic Bell patents. In the 
1890s when the basic patents expired, extensive 
duplicate development by competing companies 
emerged in a great many large cities. There were also 
a few competing long distance networks. This was 
obviously not in the public interest. If there is any- 
thing a community doesn't need two of, it is tele- 
phone systems. But they developed anyhow. 

This was a basic problem, and it was one that 
couldn't be worked out under existing law, because 
the anti-trust laws were construed to prevent the 
merger of competing companies. But this was not 
the only difficulty. Public opinion could not counte- 
nance the existing situation, where every man had 
to have two telephones to be sure he could do busi- 
ness or call his neighbor. At the same time, public 
opinion was dead set against monopoly, and it was 
generally anti-business as well. The vista of govern- 
ment ownership was wide open. 

In the face of all this, Vail set out to convince the 
people of the United States that in the case of tele- 
phone sendee, monopoly is good. It was a tremen- 
dous undertaking. But ultimately this view pre- 
vailed. In 1921, an act of Congress legalized the 
merger of competing telephone companies. With- 



42 



Goals That Build the Future 

out this achievement at that time, the telephone 
service we have today could not exist, and we would 
have lost vitality as a business. Certainly our coun- 
try would not have led the world in communications, 
as it undoubtedly has and does. So here again, the 
big, far-reaching goal was building the future. 

A third consequence of the goal was closely re- 
lated to the second. VaiFs contention was, of course, 
that the only good service would be a single, unified 
service, and he won his case on the promise to de- 
liver. But in his drive to reach his goal, he made 
another radical departure from the usual business 
practice of the times. He affirmed that the right 
course for the Bell System was to make candid dis- 
closure of information about the business. The pub- 
lic was the boss, he said, and ought to have the 
facts. His annual reports were among the first to 
give a detailed explanation of the state of the busi- 
ness. He wrote freely on many occasions. It is diffi- 
cult to imagine, now that this is the more general 
practice, what a radical departure it was half a 
century ago. 

So there were two commitments: one to give top- 
flight service, and the other to provide information. 
Add these together and you have the concep- 
tion of responsibility to the public that has invigor- 
ated the Bell System for half a century. In its begin- 

43 



Vitality in a Business Enterprise 

nings, I dare say this conception was as much in the 
forefront of business thinking as was the integration 
of basic research into a commercial enterprise. 

Another development of that period was not as 
spectacular, but has had most significant results. 
Vail set up one of the first industrial staffs. When- 
ever a goal had been set and a specific course of ac- 
tion indicated, he gave responsibility for the job to 
the appropriate line operating man. But in doing 
this he also said to a staff man: "The operating men 
who are responsible for this are too busy to do all 
the thinking that might profitably be done. Think 
about it in depth and see that these operating fel- 
lows don't want for ideas. Furthermore, make it your 
business to know how they are doing, in a way that 
I can know/' And he put some of his best men in 
key staff positions. 

This brought us quickly to the use of control 
statistics, and out of these grew the highly refined 
measurements of performance that make possible 
the kind of telephone service you now get. Nowa- 
days any number of Bell System operations are con- 
tinuously subject to the test of careful measurement. 
For instance, on what percentage of calls do tele- 
phone users have to wait more than three seconds 
before they hear the dial tone that gives them the 
signal to go ahead and dial? When appointments 



44 



Goals That Build the Future 

are made to install service, what proportion of the 
appointments do we fail to keep on time? How good 
is our performance in getting out accurate bills, in 
correctly listing names and numbers in telephone 
directories, in maintaining our lines and switching 
equipment so that customers can count on getting 
the service they want when they want it? Reports 
on these and hundreds of other work operations are 
constantly being assembled and analyzed. Districts 
can compare their performance with districts, areas 
with areas, companies with companies. Where prob- 
lems show up, we can concentrate effort to over- 
come them. And this whole process of measurement 
and comparison helps to foster keen competition 
between all Bell System operating units to excel in 
their performance. 

Statistical analysis is of course only one of the 
tools of good management, and should not be re- 
garded as anything more than that. The manager 
who subordinates all other considerations to getting 
a good index mark on a score sheet is making a great 
mistake, for in such case he is letting the tool be- 
come his master. Nevertheless, when the tool is 
rightly used, its value is tremendous. The point I 
make here is simply that the measurement process 
we find so useful today grew directly out of the 
goal-setting of many years ago. 

45 



Vitality in a Business Enterprise 

I believe this tradition of setting goals is one of 
the great strengths of the Bell System. Earlier, I had 
something to say about the danger of following 
traditional ways, but this kind of tradition can be a 
real well-spring of strength. It is deep in the heritage 
of telephone people, and is an important source of 
our vitality today. 

Some of our current goals have a quality of ex- 
citement I wish I could communicate. Take world- 
wide telephony for example. The early pioneers had 
the vision of this, but there is even more tingle in 
the forward look today because we are well on the 
way to achieving it. Back in 1956 we put in service 
the first transatlantic telephone cable, a great im- 
provement over radiotelephony. Today we have 
two across the Atlantic, another to Hawaii, another 
to Alaska, another to Puerto Rico. We are on the 
way to Bermuda, the Caribbean, South America, 
the Far East. We can see the day when you will dial 
your own path across the world, perhaps through 
cables, perhaps by way of satellites in space. Which- 
ever is best, that is what we shall use. 

Work on ocean telephone cables began more 
than thirty years ago. We could build one even 
then, but not economically, and the economics are 
the hardest part. The point I am making is that 
thirty years ago we could not see the means we 



46 



Goals That Build the Future 

have now but we could see the end, and we deeply 
wanted to put our energy and some of our money 
into getting the means. 

Even now I am talking about dialing to Paris or 
Tokyo, when we still haven't solved all the problems 
of direct distance dialing on this continent. We 
know we can solve them, but when we first started 
to plan this kind of service, about all we could say 
about our problems was that we knew we had to 
solve them. 

Let me give now a much broader illustration 
drawn from present thinking about our job ahead. 

We have always promoted and sold telephone 
service actively. We have never thought we ought 
to wait for customers to come to us. After all, we 
could hardly have the goal of universal service and 
then expect our customers to take the initiative in 
realizing it for us. During war periods, of course, we 
have temporarily had to stop promoting and selling. 
But these were interruptions. The long-run tradition 
has always been to go out and get business. 

Now something new is being added, and I suspect 
the public is already beginning to get a glimmer of 
it. People are seeing and using a growing variety of 
new instruments and communication systems for 
their homes, their offices, their factories, their farms. 
Today you are reading about pocket telephones and 

47 



Vitality in a Business Enterprise 

see-while-you-talk telephones; tomorrow, to the full 
extent the public needs, will use, and can be sold 
these and many other new services, it is going to get 
them. 

What is going on? The Bell System has a big new 
goal. For more than eighty years we have been 
working to bring the arts of transmission and switch- 
ing to the point where we could serve everybody 
over a big, reliable, basic network, and do it reason- 
ably well. This was the first necessity, and it has 
taken that long. But now we have reached that point 
and we want to take off from there. 

So we have a new goal. 

I can describe it in a very few words. It is to give 
our customers the broadest possible range of choice 
in services available through our network, and I 
mean a range of choice that will be fully comparable 
to the choices or options offered consumers by non- 
regulated, competitive industry. Of course, we have 
no thought of stepping outside our proper sphere 
in providing communication services to the public. 
But our goal is to conduct our business in such a 
manner that our customers will see in the result, in 
our line of goods and services, all the virtues of 
competition, in addition to all the values of a single, 
interconnected service. 

Can we accomplish this? I am sure there will be 

43 



Goals That Build the Future 

skeptics who will raise all sorts of questions. Let 
them raise them. I know we can do it, and we will. 

We have another new goal today that is closely 
related. It has to do with the profits of the Bell 
System. 

One aspect of the public image of our business is 
sometimes expressed like this: "It must be nice," 
people say, "to be in a business where there are no 
problems, where money is plentiful, and the revenue 
flows in without your having to fight for it." And it 
sometimes seems to us that responsible people who 
should know better are doing all they can to heighten 
the impression that we "have it made." The fact is 
that we are deeply concerned about being able to 
earn enough so that we can do everything that you 
who buy services from us really want us to do. 

Today it is clear to us that to maintain the vitality 
of our business under modern conditions, and to 
provide all the service and the kind of service the 
country needs in the times we live in, we must earn 
more than the bare minimum required to attract 
capital. We are working toward the goal of wide- 
spread acceptance of this position. The public will 
be better served, we are convinced, when the profits 
of our business are in a more reasonable relationship 
with the profits of successful and progressive non- 
regulated industries. This relationship must take 

49 



Vitality in a Business Enterprise 

into account the contribution our enterprise and 
service make to the economy and to society as a 
whole, and the responsibility a business like ours 
has to help advance the national welfare. 

This view is as new and different from the cur- 
rent prevailing public view as the idea that a monop- 
oly could be good was new in 1910. But we are con- 
vinced it is sound, and our goal is to bring about its 
acceptance. Our continued vitality demands it. 
Every purpose we serve requires it. We are confident 
this point of view will prevail and that it will benefit 
everybody who is served by or has an interest in tele- 
phone enterprise. 

When I gave the lectures I did not elaborate on 
this thinking. Subsequently, however, people out- 
side of the telephone business asked that I give 
more of the rationale behind our viewpoint, so I 
shall add a few thoughts here. 

For one thing, there is little doubt that the public 
wants the freedom to choose among optional serv- 
ices offered by the telephone companies. But offer- 
ing these options considerably increases our business 
risk. They require us to make added investment, 
they are highly competitive with the products of all 
other industry, and users can dispense with them 
any time they want to save a few dollars. So there 
simply has to be an adequate earnings incentive. 

50 






Goals That Build the Future 

Here I might transpose the old maxim, "Nothing 
ventured, nothing gained/ 7 If there is nothing to be 
gained, why venture? Yet if we do not venture, 
people will not be able to get from us services that 
they want and are entitled to have. 

Good earnings are also important from the con- 
sumer's viewpoint because they enable us to en- 
gineer and build our facilities economically. Our 
business makes a tremendous investment in physi- 
cal plant. It is most uneconomical for us to under- 
build—to put in plant piecemeal. If we are pinched 
for money, so that we can afford to build only what 
is needed at the moment, and then have to make 
additions soon after, this is the expensive way to do 
it. The dollar outlay may be held down temporarily, 
but in the long run the unit costs go up. If a build- 
ing must be added to, the addition costs more per 
cubic foot. Two small cables cost more than one 
that is twice the size. And so it goes; piecemeal build- 
ing increases the investment on which the business 
must earn for the long pull. 

But building economically costs more at the start. 
It requires that the company be in first-rate shape 
financially. To save in the long run, we must be able 
to afford a larger initial investment. 

This is an aspect of the main proposition that 
good earnings in our business, as in any other, im- 

51 



Vitality in a Business Enterprise 

prove our opportunity to use good judgment and 
act on it. If we have money to spend for preventive 
maintenance, we can shut off troubles before they 
happen. If we have money now to pay able people 
to improve our methods and procedures, we can 
make those methods and procedures more efficient 
for endless years ahead. If we have money today for 
research, we shall have service tomorrow of a quality 
and economy otherwise impossible. 

On the other hand, the company that is con- 
tinually pressed and squeezed for money loses the 
means to do things right. Skimpy earnings make it 
necessary to cut your cloth to the needs of the 
moment. If you have to be overcautious about cur- 
rent expense, you can be pushed into the situation 
of saving on maintenance items, saving on work that 
would improve operating methods, saving on train- 
ing costs, and so on. The inevitable result is that in 
the end the consumer will be getting less and paying 
more for it. 

Earnings at the bare minimum needed to attract 
capital cannot stimulate and nourish a vital busi- 
ness. But good profit encourages all creative effort. 
It attracts good people and spurs their striving. It 
promotes unstinted effort to improve technology. It 
enables the business to build economically for the 
long run. It nourishes a sense of responsibility for 

52 



Goals That Build the Future 

the social usefulness of the business as an employer, 
as a public servant, as a corporate citizen, and as a 
trustee for the savings of people. It makes a business 
such as ours a buoyant force in the whole economy, 
rather than a drag on it. This very briefly is some of 
our reasoning. Our goal, as I have said, is to secure 
widespread acceptance that our view is sound and 
that good telephone earnings will produce the best 
service for telephone users and the biggest value for 
their money. 

A goal like this must of course stand on its own 
merits, and we must prove its validity in perform- 
ance. But when we have behind us a tradition of 
far-seeing, courageous action in setting goals and 
moving to reach them, we not only want to measure 
up, we want to do better than has ever been done 
before. This is the essence of vitality. 

The examples I have given from the past show 
how goals shape decisions. So too, of course, must 
the goals of the present. And it is also true that a 
decision and a goal can strongly reinforce each 
other; the action is two-way rather than one-way. A 
case in point was the decision of American Tele- 
phone and Telegraph Company management to 
maintain the $9 dividend to share owners in the 
great depression of the 1930s. 

The company had a publicly stated policy of 

53 



Vitality in a Business Enterprise 

reasonable and regular dividends. The goal here, of 
course, was to maintain top-grade investment char- 
acter and reputation. For four consecutive years 
during the depression, the dividend was not earned. 
But despite all the pressures, the concern, the diffi- 
culties, a decision to maintain the regular dividend 
was made, strictly on the premise that the future 
credit and financial good name of the business re- 
quired it. 

So a goal and a decision reinforced each other. 
And as events proved, the future did require it. In 
the postwar years the company needed new capital 
on a scale never before approached by any business 
in the world. The investment character the Bell 
System had built for itself proved indispensable to 
our ability to meet the tremendous communication 
needs of the nation. 

Of course this one decision didn't settle our in- 
vestment character for all time. No decision, no 
goal, will ever settle anything permanently. But this 
decision was a mighty support for us in the early 
postwar period when we had minimal earnings and 
at the same time a vast need for new investment. It 
held us firm while we gathered forces to move on 
to the next vital goal: to recover our earning power. 

Parallels and examples similar to those I have 
given from the telephone business may be found in 



54 



Goals That Build the Future 

any successful company that has developed with 
the country and maintained its vigor over a long 
period. This is what distinguishes the American 
economy from some other parts of the world. I have 
thought a good deal therefore about what it is that 
produces the right goal at the right time, and the 
determination to see it through. Three situations or 
conditions have occurred to me. Maybe there are 
others. But it seems to me that the way we respond 
to these three has a lot to do with it. 

The first condition that favors the setting of goals, 
and action to reach them, appeals to me particularly. 
This is when the people of a business have a tra- 
ditional and instinctive feeling for quality in every 
aspect of a company's affairs. 

In the Bell System, offering as we do a personal, 
necessary, human service, one of our first obligations 
—I might almost say the very first necessity— is what 
I call a drive for quality. We must aim to do better 
than people expect of us. To begin with, we must 
set very high technical standards and try constantly 
to raise the level of performance. Then to help the 
effort, every day we must measure little variations in 
performance that our customers would never detect. 
And yet we know we sometimes fall short. When 
this happens, we aim to know about it and fix it 
before anyone else is even aware of it. If our habit 

55 



Vitality in a Business Enterprise 

had been to wait until somebody complained about 
something before we did anything about it, this 
business would never have got off the ground. And 
if this ever becomes our attitude we will fall on our 
face. 

I hope the reader will understand that I am not 
discussing what a good job we do. We groan about 
our shortcomings. I am simply describing a principle 
of effort. Naturally this principle makes a better 
product than we could turn out otherwise. And of 
course, it is good business. But it does much more 
than bring in business. If you can get the idea of 
quality into people's blood and people's bones, they 
are alert and receptive to a goal that is beyond their 
present reach. This is the hope we build on for the 
future. This is how we know that when a new goal 
asks people to stretch further, they will do it, not 
because they are ordered to but because it is in their 
very being to strive for quality. And they will grow 
and feel good about it, too, and get great satisfaction 
from their accomplishment. 

The principle of quality is at the heart of tradi- 
tion in our business. We describe it in homely, time- 
honored, deeply-felt words: "the spirit of service/' 
But this is not something just to talk about. It is 
something we intend to live by, and we do. It be- 
comes more visible under stress or disaster— hurri- 

56 



Goals That Build the Future 

cane or fire, earthquake or flood— but in order to 
show at those times, it must be deep in people at all 
times. This quality in human effort is what great 
goals are made of. This is what makes a great 
business. 

A second situation that favors the setting of goals 
is the making of mistakes. I am not advocating mis- 
takes. We are in business to do things right. An 
error is an error. It costs money, hurts the service, 
and wastes time. But enterprise means risk and there 
will always be some failure. What is then essential 
is to learn from it. 

I have a great pride in our business, in its history 
and traditions and present performance, and I have 
great faith in its future. But I also believe it is what 
it is, and has the vitality to be much more, because 
there have been some errors, and to get on the right 
track there had to be new and bold thinking, and 
therefore goals that excited people. I am sure, too, 
that this is an experience we have in common with 
most other vital businesses. The important thing, 
to repeat, is to be able to see what is wrong and to 
learn from it. From this learning come the goals and 
the actions needed to build vitality. 

A third influence on business goals is the ceaseless 
pressure of external factors. We live in a time of 
continual and rapid change. The world is on the 

57 



Vitality in a Business Enterprise 

move— everywhere, everybody, everything. The pres- 
sures that require a business to set new goals and 
alter course are many and varied, and they some- 
times appear in a hurry. Competence in internal 
management affairs— the day-to-day or even year-to- 
year job of running a business— is just not enough. 
To maintain vitality, we must be alive and alert to 
what is going on outside. Often the choice seems to 
be: get a new view of the business and set out to 
achieve it, or perish. 

To some businesses, the external factor that 
presses hardest may be the changing social and eco- 
nomic character of the towns from which they draw 
their work force. 

To some, it may be legislation that will funda- 
mentally alter their methods of operation. 

To some, it may be changes in the tariff laws that 
will upset competitive conditions. 

To some, it may be the rising standard of living 
which affects, for good or bad, the demand for their 
products. 

To some, it may be political unrest in a foreign 
country in which they operate or where they get 
their raw materials. 

To some, it may be fundamental changes in tech- 
nology or competition that revolutionize their busi- 
ness. 

58 



Goals That Build the Future 

To some, it may be the emergence of a new politi- 
cal, social, or economic trend that vitally affects 
their future. 

Whatever the source— and these suggestions only 
scratch the surface of possibilities— external influ- 
ences must be seen in advance, kept always in view, 
and handled with wisdom and courage. The ques- 
tion really is this: Is my business determined to be 
on the developing forefront of anything that can 
affect it? Will it act while it still has time for deci- 
sion, and freedom to choose among alternatives? 

The opposite course is to disregard the signs, 
wait for the future to become more clear, and then 
adjust to whatever conditions events impose. Such 
a course may seem to allow a management to func- 
tion, for the moment, with a greater sense of cer- 
tainty and security. However, this period is likely 
to be short-lived, and the price is high— a loss of 
some degree of control over the future. 

To put it another way, we must take all possible 
initiative for acting, rather than depend on reacting. 
We may not be able to foresee the future with any 
great certainty, but one thing is certain: at least 
some of the important external pressures will be 
different from what they were in the past. Change 
we must, whether we like it or not. It seems only 
prudent therefore to get an early jump on the future 

59 



Vitality in a Business Enterprise 

while there are many possible courses of action 
available, instead of waiting until events force our 
hand. 

I realize there may be times when the right de- 
cision is to sit tight and ride out the storm. But this 
should be a deliberate decision after reading the 
signs. In any case the head of a business needs to be 
asking: How can I keep my thinking sharp enough 
and also broad enough? Am I scanning a wide hori- 
zon ahead, or just a few degrees? Are the current 
goals adequate? Are we striving for the right things? 
Are our efforts in balance over the whole range of 
things we should be doing? 

I sometimes hear people say that there is just one 
goal— profit— that wraps up everything. I hope I have 
made clear how important I think profit is. But it 
doesn't wrap up everything. It is possible to be profit- 
able today, or even for some time in the future, 
without doing some of the things necessary for the 
long pull. So I feel I must also ask: "What are these 
things on which I ought constantly to be checking 
myself?" 

I would like to list fifteen criteria that seem useful 
to me in judging whether any business is currently 
doing the things that build vitality. These are the 
products of about ten years of exploration in a course 
for executives in the field of credit and financial 

60 



Goals That Build the Future 

management. While Bell System people were in- 
strumental in getting the exploring done, the list 
itself was hammered out by the financial men. Each 
year for the last decade, a group of about eighty was 
asked: "If you were an important investor in or a 
creditor of a particular business, and if you were 
interested in maximum assurance of the long-run 
soundness of that business, what would you look at? 
What criteria would you use in making a judg- 
ment?" 

This list represents their consensus. 

The first four criteria cover the general areas of 
financial and product development: 

Does the business make a satisfactory profit? 

Is it protecting its assets and using them effi- 
ciently? 

Is it strengthening its position in the industry and 
the economy? 

Is it developing new products, new fields, new 
techniques, new demands? 

You will note that the first question on the list 
concerns a satisfactory profit. What is satisfactory? 
There are a number of tests, of course, but I would 
like to make a basic point. If "satisfactory" is judged 
only by rate of return, by dividends, or by compari- 
sons with other companies or industries, an im- 

61 



Vitality in a Business Enterprise 

portant element will be overlooked. It is today's 
profit that enables a business to do the things today 
that are needed for success tomorrow. Most of the 
fourteen questions listed after profit depend on 
profit. In short, a satisfactory profit means a proper 
rate of return after— and this is the important word 
—after proper attention has been given to all the 
other problems. If we skimp on the money and ef- 
fort devoted to these purposes, the business will 
suffer in the future. We need a clear understanding 
and support of this position in every segment of 
society. 

The next eight criteria have to do with relation- 
ships—that is, the rights and duties that exist be- 
tween a business and the people whose lives it 
affects. 

Does the business conform fully with laws and 
ethical standards? 

Is it maintaining good shareholder relations? 

Is it alert to satisfy the wants of customers? 

Does it maintain good relations with competitors, 
to improve the industry? 

Is the business earning the respect of the com- 
munities in which it operates? 

Is it helping to influence favorably the climate in 
which all business operates? 

62 



Goals That Build the Future 

Are the people in the business growing, in terms 
of morale, attitude, ability, initiative, self-re- 
liance and creativity? 

Is the business contributing as it should to the 
welfare of its people, in terms of their oppor- 
tunity to do for themselves in such matters as 
economic security, health, safety, family sta- 
bility, and community responsibility? 

I should like to comment briefly on only one of 
the above questions, namely, improvement of the 
general climate in which all business operates. 

In my judgment, American business has done at 
least as well in meeting its obligations over the years 
as has any other segment of American society. Cer- 
tainly our business system is not perfect. Neverthe- 
less, its achievements are great and I wholeheartedly 
believe that the facts justify a much better climate 
of public opinion than we have had. The unfor- 
tunate thing about the rather mediocre climate we 
do have is, of course, that it reduces incentives to do 
the best possible job, and makes it harder for a 
business to do what is right— right for the public, I 
mean, right for everybody. 

I can't help thinking, however, that we business- 
men have not been very effective in our efforts to 
improve this climate we work in. Are we really try- 

63 



Vitality in a Business Enterprise 

ing to bring about an atmosphere in which all busi- 
ness can operate better? Or do we tend to think 
mainly of our own interests? Do we speak out often 
enough? And when we speak on public issues, do 
we tend to adopt currently fashionable positions, or 
do we develop and state our own independent and 
informed opinions? I believe that when we discuss 
public issues, we must prepare ourselves thought- 
fully and speak forcefully with the intent of making 
a constructive contribution. As I have said, I am 
certain that the facts warrant a better public view 
of what business does and what it stands for; but 
this will come about only with our best performance 
in all we say, as well as in all we do. 

The final three criteria in the list concern carry- 
ing on and improving the management of a busi- 
ness: 

Is the company improving its knowledge of, and 

control over, its business? 
Is it providing for future top management? 
Is it contributing to the available knowledge 

about managing? 

The last question here is probably the only one 
in this group that might make anyone pause. But 
after all, if the general body of knowledge about 

64 



Goals That Build the Future 

managing is to grow, who but ourselves can feel 
responsible? 

I would be less than candid if I did not say that 
in my business experience I have found very little 
in the literature of management that has helped me 
to be a better manager. This is not a criticism of the 
writers of books and articles. Many of them are not 
writing about actual management experience be- 
cause it is not available to them to be written about. 
My point is rather that business organizations, in- 
cluding my own, might well do a lot more to study 
their own important experience and write about 
it so that all might profit by it. I believe that if we 
will only share the best of the knowledge that each 
of us has, build up the sum total of it, and make it 
widely available, this will bring important benefits 
all around. 

Business management is becoming more com- 
plex. In the future, a larger proportion of men with 
the potential to carry the challenging responsibilities 
of management must actually develop their poten- 
tial to the full. To do this may well require that a 
more systematic learning of certain of the arts of 
management will have to be relied on than has been 
true in the past. To bring this about, better man- 
agement literature is necessary, and it is up to busi- 
ness to identify the areas of knowledge that can be 

65 



Vitality in a Business Enterprise 

effectively taught and to produce the necessary litera- 
ture. Nobody else has adequate access to the experi- 
ence. In making this point, however, I certainly do 
not want to lead anyone into the error of thinking 
that how to manage will ever be learned from books 
or teaching alone. Only by facing the facts of ex- 
perience can a man develop real management judg- 
ment and leadership. 

One of my reasons for listing a common set of 
criteria as a basis for keeping our goals sharp is that 
I represent a regulated industry. We have considered 
ourselves different from non-regulated industry for 
so long that we may not have noticed how the gap 
is narrowing. When our successors meet to discuss 
such matters in a few years, they may search hard 
to find real differences. So I believe we should all 
begin now to consider the common criteria by which 
we all will be judged. 

Although a few of the questions in this list are 
unusual, most of them are clearly quite common. 
Their order and wording have no particular signifi- 
cance. Almost anyone could produce a similar list 
of his own. The main value is not in the novelty of 
the items covered, but in the comprehensive cover- 
age. The question is not, "Which items are more 
important?" but rather, "Aren't they all important 
for the long run?" I believe they are. Some may need 



66 



Goals That Build the Future 

more attention than others at a particular moment, 
but this is only a short-run consideration. 

Any manager who makes a comprehensive list 
like this, and looks at it thoughtfully once in a while, 
will see some opportunities he might otherwise miss 
to make himself some new goals and build a surplus 
of vitality while he has the chance to act on his own 
initiative. A list like this can also be useful as a 
check on decisions, for in one sense every decision 
either reaffirms an existing goal or serves notice that 
it is being revised or superseded. 

For managers at all levels throughout an organi- 
zation, particularly a large one, sharply-defined com- 
pany goals in all these areas will help to assure that 
the decisions that must be made will contribute to 
company progress. As in consulting a road map, one 
must first know where one wants to go in order to 
decide what route to take. In the absence of clear 
goals in the areas covered in this list, on what basis 
would a business manager arrive at a decision help- 
ful to the aims of his company? All decisions are 
made according to what the decider feels it is im- 
portant for him or for his company to do or to 
become. 

If a business is to have vitality for the long run, 
an important part of the current activities of the 
top executives must go into setting goals that build 

67 



Vitality in a Business Enterprise 

the future. As head of the American Telephone and 
Telegraph Company I am responsible for today's 
results. I must do everything I conceivably can to 
assure the current success of my business. I must be 
deeply concerned with the actions and decisions 
that maintain current vitality. Yet with all this, the 
greatest challenge to me is to build vitality for 
tomorrow. 

In other words, shapin g the future is the top ex- 
ecutive's primary job. While he must work to the 
limit fofTurrenFluccess, in addition he must be 
always alert to this fact— that success in the pres- 
ent is what gives him the opportunity to run the 
business as it should be run from here on out. And 
he will always say to himself, "This is what goals 
are for, to exploit the leeway that current success 
gives in the interest of future vitality/' 



68 



THE SPARK 

OF 

INDIVIDUALITY 



_ 



Vitality, I have emphasized, is an attribute of 
people, not of things. A vital business is one with 
vital people. As we have seen, there are several forces 
that can undermine vitality, but if we are alert and 
on the watch, they need not get a start. 

On this foundation of alertness, of constant self- 
examination, we base our effort to increase vitality. 
In this effort, goal-setting is tremendously impor- 
tant. Goals that excite people's imagination, and 
rouse them to strive toward accomplishment pres- 
ently out of reach, are a powerful energizing force. 
I have pointed out the relationship between certain 
long-range goals and key decisions in the Bell Sys- 
tem, and indicated how a tradition of setting goals 
spurs initiative and courage to set still other chal- 
lenging goals for the future. Further, I have sug- 
gested that clearly defined goals in all areas of 
company activity, rather than in just a few, are im- 
portant to building vigor and strength. 

But every consideration of how to manage comes 



71 



Vitality in a Business Enterprise 

down ultimately to the people involved. How does 
a business get, hold, and help develop people who 
are capable of sustained competence and creative, 
venturesome drive, and who will have also a strong 
feeling of ethical responsibility? Only as we succeed 
in this shall we succeed in maintaining and increas- 
ing business vitality. 

Today many large companies in a given industry 
tend to use similar processes and equipment. Their 
organization structures may have much in common, 
and in a good many instances the differences in prod- 
ucts are not great. Yet some companies are more 
successful than others; they are more profitable, 
they are growing faster, and they have better pros- 
pects. 

What makes the difference? An important influ- 
ence is that one company gets better people, asks 
more of them, gives them more, places them more 
effectively, and therefore gets better human per- 
formance. It does this first with management people, 
and through them the superior performance extends 
to everybody. 

The difference may be hard to see at first glance. 
The people in the various companies may all be 
trained and experienced in their jobs. They perform 
similar functions. Many of them seem to have about 
the same degree of competence. But one organiza- 

72 



The Spark of Individuality 

tion is better over the long run. It may not be much 
better, but it is enough better to make that company 
the leader. 

I believe competitive strength in the future will 
rest even more on the quality of the management 
organization than it does today. Certain leveling in- 
fluences tend nowadays to reduce other differences 
between competitors. Patent protection, for ex- 
ample, seems less certain than it did in the past. 
The weight of taxation and the severity of anti-trust 
actions make it more difficult for any one company 
to out-distance the field. The exercise of union 
power has a similar long-run effect. These trends 
suggest that we need to be increasingly concerned 
with developing strong, venturesome, competent 
management people. 

So, whenever I am asked what is my number one 
challenge in my present job, there is no question 
about the answer. The answer is simply "people." 
I know it is trite. I suppose I could invent some 
elaborate language that would make it appear mys- 
terious and un-trite. But the answer would still be 
the same, and I don't see how it could be anything 
else. 

My number one aim is to have in all manage- 
ment jobs the most vital, intelligent, positive, im- 
aginative men of brains and high character that it is 

73 



Vitality in a Business Enterprise 

possible to have. I want men who will outdo me 
and my associates. I want to get them into spots 
where their ability counts, and in so doing encour- 
age and support their growth in ways that are im- 
portant to them, to the business, to their families, 
and to the community. This is the way a business is 
built, by getting the right people into the right spots 
and giving them something to work for. 

How is this done? First let me state a basic prin- 
ciple: I start from the conviction that the people 
we want and need are whole men— self-reliant in- 
dividuals—and that everything we do that concerns 
their selection and development, the jobs we assign 
them, the way we train them, the way we lead them, 
must be aimed at helping them to increase their in- 
dividuality and stature, their power of imagination, 
their ability to work effectively with associates, their 
independence, their command of themselves. 

Perhaps this sounds as though the way to build 
strength for the future is simply to fill the organiza- 
tion with perfect people. I guess that would be the 
way, if it were possible. But looking at the matter 
realistically, I think the job of generating vital per- 
formance can be divided into two parts. One is to 
watch more carefully what people are hired, how 
they are developed, and who among them are moved 
into key spots. We can always do better at these 



74 



The Spark of Individuality 

things. The other half is to accept the fact that none 
of us is perfect and that our successors won't be 
either. We must accept and respect people as they 
are, help them make the most of their strengths, 
and leave a tradition that will help our successors to 
do likewise. 

There has been a lot of talk about how the needs 
and drives and processes of business organizations 
smother individuals. The word that pops up most 
often in these discussions is "conformity/' which 
many people apparently see as something evil. I 
think this is too bad, for in my judgment it only con- 
fuses the real issue. 

Successful organized effort depends on the power 
of individuals to make highly personal contribu- 
tions. To make his best contribution, a man must 
be his own unique self and he must always know 
who he is. But whenever two people come together 
to do something, there must be some conformity. 
To some extent they must think and act alike. 
Otherwise any organized society would be impos- 
sible. There is a lot of conformity in every group 
effort— government, business, education, religion. 
To be against all conformity is to be against order 
and for chaos. 

The central problem today is no different from 
what it has always been. Between the need for con- 

75 



Vitality in a Business Enterprise 

formity on the one hand, and the purely personal 
needs of individuals on the other, there is conflict, 
push and pull, stress and strain. 

Is this bad? Of course it isn't. This is the conflict 
that makes men men, and it will be a sad world if 
we ever come to see it as bad. 

Certainly some individuals in business are sub- 
merged. This happens because there is a weakness 
somewhere. Maybe it is basically in the person. Or 
it may be in the organization leadership, which 
failed to draw out the strength he had. This is why 
I discussed at some length, earlier in this book, sev- 
eral of the organizational attitudes and actions that 
can weaken vitality. But our concern is not with 
conformity as such. Our concern is how to build 
individual vitality in those situations where some 
conformity is also required. 

Society today depends on large organizations 
much more than it did in the past. In consequence 
there is a greater need for the kind of conformity 
that enables people working together to get big 
jobs done. I wonder if some of the current hullabaloo 
on this subject may not arise from the fact that 
many people just don't care for the idea that there 
have to be large organizations. Maybe they don't 
want to face up to the difficulties of this conflict 
that separates the men from the boys. But the diffi- 

76 



The Spark of Individuality 

culties must be faced. There is no possible way to 
avoid them. Every man who elects to join a business 
must accept the challenge. He can't leave it to his 
company to find ways to keep him whole. He must 
work at it himself. This is what vitality is all about: 
the power of the individual to handle his conflict 
with any organization he happens to get involved 
with, and be a better man because of it. 

I would like to be positive in stating that I do not 
think the vitality of a business is determined by its 
size. Vitality, or the lack of it, may be more im- 
mediately apparent in a small business. Or a large 
business that has been successful can go along for a 
considerable period of time after it has lost vitality. 
But vitality is related to the abilities and attitudes of 
the people in a business, rather than to the size of 
the organization. I do believe that large businesses 
must be more vigilant than small businesses about 
vitality, but only because the more complicated na- 
ture of large organizations may make it more difficult 
to see the signs that vitality is waning. 

To consider a little further this question of the 
power of the individual to handle himself in the or- 
ganization, I shall mention an experiment we are 
making in the Bell System to see if we can help 
young men start off on the right foot at the very be- 
ginning of their careers. 



77 



Vitality in a Business Enterprise 

In this pilot project, we first bring together a 
group of recently hired college graduates and spend 
several days emphasizing two fundamentals. We say 
to them, first, "It is your personal responsibility to 
make sure you develop yourselves. No one else can 
protect and develop your individuality. This is up to 
you. Prepare yourselves, make your own plans, and 
keep the initiative in your own hands/' 

Second, we deliberately alert them to some of the 
wrong influences they may run up against; for ex- 
ample, admonitions from bosses to "do it my way"; 
the well-meaning assistance of older managers who 
are passing on old wisdom; their equally well-mean- 
ing interest in protecting youngsters against risk; in 
short, the very things that work against a man's de- 
termination to be an individual person and become 
a bigger one. 

After this kind of briefing, the young men spend 
their first year in the business on management as- 
signments where they have to find out for them- 
selves what they need to know to get their jobs done, 
without any other formal training or preparation. 
The assignments are chosen to definitely challenge 
and strain individual ability and ingenuity. At the 
end of the first year, performances are appraised and 
the top third of the group are invited to attend an 
eight-week graduate-level management course at a 

78 



The Spark of Individuality 

university, where their work is again appraised, this 
time by the university staff, and reported to their 
companies. 

Interestingly enough, it appears that to most of 
these young men, it comes as a new idea that pro- 
tecting and developing their individuality is their 
own personal problem; this despite the fact that they 
have just finished sixteen or more years of education 
that should have driven the point home. 

This project is new, it is experimental, and it is 
too early to draw firm conclusions. But the indica- 
tions are that the men can be helped to become ac- 
tively concerned about maintaining their individual 
vitality, and that this way of introducing them to 
the business really does move them to take more re- 
sponsibility for making their own futures. In addi- 
tion, they become accustomed early in the game to 
the idea of competing for recognition and advance- 
ment. And it looks as though we might revise up- 
ward our ideas of what a young manager can 
accomplish when he has the opportunity to do more 
for himself, and be more of a person because of it. 

Shall every man be a person in his own right? 
Shall all American institutions share responsibility 
to help make this choice clear to all the individuals 
they influence? I believe the answer should be "Yes" 
to both questions. I also believe that here is where 

79 



Vitality in a Business Enterprise 

the issue is joined in the battle for men's minds. 
We in the free world are opposed by a system that 
completely subjects the individual to organized au- 
thority. Our faith is that vital individuals, who are 
no less individuals because they work together for 
common purposes, will maintain a free society in any 
kind of competition. 

Against this background of basic principle and 
belief, I should like to describe some of the factors 
that seem to me most important in building the 
kind of organization, made up of the kind of indi- 
viduals, that I think a business like mine ought to 
have. 

The first has to do with the feeling of personal 
significance. If people are to develop vitality in a 
business, the work they do and their business rela- 
tionships must help them achieve a feeling of per- 
sonal worth. A man's career must make a positive 
contribution to balance in his personal life, in which 
family, community, church, friends, recreation are 
all part of the whole. When I wrote earlier that we 
want whole men, I used the word in this sense. But 
if these are the men a business wants, then the busi- 
ness must understand their need for wholeness, and 
its leaders must show in their own lives that they 
have this understanding. I firmly believe that a 
human institution in which people do not achieve 



80 



The Spark of Individuality 

personal significance is not adequate, no matter how 
glittering its external accomplishments; and it does 
not have a good prospect for future success. 

Second, I'd like to state a point of view about 
business ethics that I came across recently, and that 
seems to me to offer considerable food for thought. 
Usually, when we talk about business ethics, we 
have in mind things like honesty and fair dealing, 
the need for which is self-evident. This view of 
ethics goes deeper. It is closely related to vitality 
because it deals with the obligation of managers to 
everlastingly grow and prepare themselves for right 
actions. 

To manage is to make decisions, to choose among 
different courses of action. Unless we are willing to 
say that decisions are purely matters of expediency, 
I think we have to agree that the choices we make 
are really ethical choices. The conscientious man- 
ager may not always be aware of this, but it is im- 
plicit in the very fact that he considers himself 
conscientious. 

When a man makes a decision, on what basis 
shall it be judged? On the basis that it represented 
the best ethical choice he could make at the time he 
made it? The view I believe we must take says no, 
this is not enough. Rather, the responsibility of the 
decider goes all the way back to the time when the 



81 



Vitality in a Business Enterprise 

event requiring the decision could have been fore- 
seen. Did he then make the effort to foresee? And 
did he thereupon make the further effort to come 
up with a better choice than would have been pos- 
sible without the exercise of foresight? If the answer 
to either question is no, then he failed to meet his 
ethical responsibility. 

This idea of a man's duties and obligations is ex- 
tremely demanding. For it is all-inclusive. It requires 
us to make the most of our talents, not only in what 
we are now doing, but in foreseeing and preparing 
for the future. 

Here is a far-reaching principle for personal 
growth and development, one that makes a man's 
conscience bother him if he isn't always doing all he 
can do to prepare himself. And if he stumbles some 
day because he was not prepared, he will know per- 
fectly well that the real error was not in what he did 
or failed to do at that particular time. The real 
ethical failure came earlier. 

This principle says, in fact, that from an ethical 
standpoint we really don't have any option as to 
whether we want to develop our abilities. If we in- 
tend to accept our obligations as human beings, we 
must do so. Thus the building of vitality, individu- 
ally and as an organization, becomes an ethical or 
moral matter. In my observation, whenever you find 

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The Spark of Individuality 

a first-rate manager, one who is going to the top, 
you are usually looking at a man who has something 
like this sense of his ethical responsibilities. 

What should an ethical, capable manager be able 
to do? I won't trouble you with a listing of qualities 
or traits. These differ among capable managers. But 
there are several tests we want every manager in our 
business to meet. I can summarize them as follows: 

First, he is able to state a goal and reach it. Of 
course, no one sets goals without some account- 
ability. But the ability to say, ''Here is where I in- 
tend to go," and get there, is the first requirement 
that distinguishes a real manager from those who 
do not have the talent to manage. 

Second, he reaches these goals by organizing and 
inspiring the efforts of other people. He is able to 
lead others in such a way that they find their pursuit 
of the goals a satisfying experience. Demonstrating 
his own industry and devotion helps a lot, naturally; 
people want not only a boss but a man they can 
admire. 

Third, his judgment is respected by those whose 
cooperation is needed. The structure of business is 
a chain of command, but most people outside of 
business do not realize how little command is used. 
Commands are rarely resorted to, and only when the 
normal processes of cooperation and accommoda- 



83 



Vitality in a Business Enterprise 

tion break down. And break down they will unless 
managers are effective in getting people to work with 
them. 

Fourth, he performs well under stress. Stress of 
one kind or another is always present, and always 
will be. To be effective under pressure, a manager 
needs stability and strength of character. Whatever 
the cause of the stress, he must be able to see it as 
a challenge rather than as a threat. 

With this simple but basic view of what success- 
ful managers are able to do, how does a business 
go about finding and equipping people to manage 
well? I see several major actions or influences that 
must all be dealt with. 

The opening question is of course: "Whom do 
we hire?" I have already stated my belief that most 
people who demonstrate a plus of vitality in a busi- 
ness already have some of this quality well de- 
veloped when they first come to work. The young 
person has already been molded by some of the 
most formative influences he will ever be exposed 
to, his family, his religion or lack of it, and his edu- 
cation. Many aspects of his personality and charac- 
ter have developed to a point where the influence 
of any business will be limited. For this reason, it is 
crucially important to select the people who have 
the greatest potential. I think success here will de- 

84 



The Spark of Individuality 

pend on two things. One is how the business looks 
to the people it wants. The other is the company's 
skill in picking the best candidates, people with 
minds of their own who have the determination to 
dig and do, the disposition to find major satisfaction 
in real accomplishment. 

I have already pointed out the importance of the 
kind of image a company presents to young people. 
The company that attracts the more venturesome in- 
dividuals is the company that they see as being the 
kind of place where they would like to work. Just 
a word, however, about our ability to pick the men 
we need. The essence of this, in my judgment, is 
that we must put the work of recruiting and em- 
ploying people in very good hands. The individuals 
who have this responsibility must have the insight 
and judgment to recognize a vital man, a potential 
"comer," when they see one. They must also have 
a clear and complete understanding of the com- 
pany's goals and of the kind of men who will be 
needed for their achievement. If there is any lack of 
insight, or lack of understanding in these things, 
then you can depend on it that the wrong people will 
be employed. 

The next factor is a young person's early experi- 
ence in the business. In the Bell System, we are 
coming more and more to realize that the influence 



85 



Vitality in a Business Enterprise 

of the first years of work is of the utmost conse- 
quence. The fact is that people learn fast, and if 
you are lax about helping them learn the things that 
are most worth learning, they will learn far too much 
of the opposite. 

So in our business we feel this way: from a man's 
first day in the business, he must be given responsi- 
bilities that tax his current ability. His early years 
should constitute a genuine test. The company 
needs to know quickly how much he has on the 
ball. He, in turn, wants to know quickly whether the 
opportunities the company gives him measure up 
to his hopes and aims. Neither test can take place 
unless his job assignments are truly challenging, and 
I mean challenging in his judgment, not only in the 
company's. 

I have heard that some companies are fearful of 
hiring men who have high aspirations and great 
self-confidence— cocky young fellows some of them 
may be. Personally, I think I would want to get the 
benefit of those good qualities they have. But I 
would also want to be sure that we put such men 
into work situations which will bring home to them 
quickly how much they have to learn. 

A third important factor in management develop- 
ment is the way in which responsibility is delegated. 
People learn to manage by managing and by being 

86 



The Spark of Individuality 

managed. If a subordinate does not get a true dele- 
gation of authority, if he is not made responsible for 
success or failure, I am afraid the desired develop- 
ment will not occur. So far as learning is concerned, 
the essential point in the delegation of responsi- 
bility is the chance to fail, and the great test of in- 
genuity and judgment not to fail. Yet some bosses 
can hardly bring themselves to let a subordinate 
really take a risk. The only cure I know for this is 
to bring home to such bosses that their own worth 
to the business will be judged largely on the basis 
of their ability to help people grow. 

Another factor in management development is 
training. I have been quoted around our business, 
and correctly, as saying that I have never been a stu- 
dent in a management training course. This has 
been interpreted on occasion to mean that I do not 
believe such courses to be important or useful. Noth- 
ing could be further from the truth. When I was 
coming along, there were no management develop- 
ment courses. One had to learn on the job or not 
at all. I had to learn on my own; I had to be a careful 
observer of good and bad in a boss; I had to do 
more of my own thinking about what managing is. 
It was good training and I don't regret doing it the 
way I did. I am not sure today that there is any short 
cut to getting the equivalent, and I confess I have 



87 



Vitality in a Business Enterprise 

been skeptical of some efforts. But I do believe 
that well conceived, carefully taught, good, rigorous 
courses can shorten the time needed to acquire man- 
agement knowledge and skills. They can hasten 
and solidify the feeling of responsibility in many 
managers. We will probably have fewer failures 
among potentially good men. Good, rigorous courses 
also stimulate thinking and set a man to seeking out 
his own broader horizons of knowledge. It seems to 
me that balance is the essential element here, teach- 
ing by formal programs those things that can be 
best learned that way, and doing on the job those 
things that require personal experience on the firing 
line. We need to be sure that the teaching is good 
teaching, of good material. (I mentioned in the pre- 
ceding chapter the obligation I think all businesses 
have to help produce a good management litera- 
ture.) And we need to hold trainees accountable to 
make the most of these opportunities. 

There are other important aspects of manage- 
ment and development besides training. One is ac- 
curate appraisal of performance. Another is the 
handling of incentives. A third is the way a business 
is organized. The last, and in my opinion most im- 
portant of all, is to get men to understand that they 
themselves are primarily responsible for their own 
growth and development. This principle, as we have 

88 



The Spark of Individuality 

seen, underlies the pilot project that I described 
earlier in this chapter. 

I don't suppose we or any other company will 
ever work out a fool-proof appraisal system. But if 
we make the standards too low 7 so that average 
looks good and good looks excellent, we will never 
get a basis for comparison that will spotlight the out- 
standing under any kind of appraisal system. 

I think the first basic problem is this: we need a 
better definition of what excellent management per- 
formance really is. This definition must include not 
merely the actions that bring current success; it must 
also take into account the things that need to be 
done to build vitality, for instance, the ability of 
managers to give subordinates a true delegation of 
responsibility, their ability to choose people, to help 
them develop their abilities, and to set goals. When 
we get such a definition, when we have comprehen- 
sive standards of performance that describe accu- 
rately all that we really want, then and only then 
will we be in a proper position to insist that every 
management person be judged according to what 
the standards call for. 

By incentives I mean all the ways in which a com- 
pany can tell a man how he is doing. These may be 
tangible or intangible, praise or criticism, a raise or 
no raise, promotion or demotion. The way incen- 



89 



Vitality in a Business Enterprise 

tives are handled ultimately determines the charac- 
ter of a management organization. First there must 
be high standards of performance, and second, 
willingness and astuteness in using the available in- 
centives to bring about what is wanted. If top per- 
formance brings no more reward than performance 
that is merely adequate, then merely adequate per- 
formance will surely become the way of life. 

With regard to forms of organization, naturally 
the first consideration is to get the work done. But 
the way the work is organized also has an influence 
on how good a job we do in developing people. 
There may well be an ideal form of organization to 
achieve current success. However, by departing from 
this a little, we can often push more challenge at 
more people, and in the long run develop greater 
management competence. Like spending money for 
research, this amounts to using some of our im- 
mediate resources to bring about greater assurance 
of long-run success. 

What this means in practice is that occasionally 
a job will be made for a man. It will be a job that 
will bring out his best, or press him where he needs 
to be pressed, or enable him to get perspective on 
matters that will be useful later on. Sometimes it 
will be a job expressly designed to test him and to 
make possible a more accurate judgment of his abil- 



90 



The Spark of Individuality 

ity and potential. This may not be ideal organiza- 
tion, but in what it accomplishes for the man and 
his future usefulness, it may be worth much more 
than the cost, if a cost there is. 

The last influence on management development 
that I want to write about transcends all the others. 
This is the necessity, as I have said, that each man 
feel primarily responsible for his own development. 
If you ask a man, "Who is primarily responsible?" 
he will almost always say, "I am." But from our ex- 
perience we know that in many cases this acceptance 
is more in a man's mouth than in his mind. Many 
people seem to think that self-development consists 
of working hard in a formal training course, or 
learning additional skills when assigned to a new 
job. While they respond vigorously enough to ac- 
tivities the company puts in their way, they are not 
self-starters. This is extremely unfortunate, because 
if a man is not his own prime mover, the company's 
efforts to help him aren't worth the time and the 
expense. 

To a young man, a large company may look 
rather like a continuation of the educational system 
he grew up in. But it isn't. There are fundamental 
differences. The main drive of the people in a busi- 
ness is not to teach, although this is important, but 
to get the work done well. Then too, the require- 

91 



Vitality in a Business Enterprise 

ments for individual success cannot be spelled out 
as they are in a school marking system. The danger, 
I think, is that a young person may not see the dif- 
ferences between a business and an educational sys- 
tem until it is too late. 

It seems to me that we in business must take a 
good deal of the blame when young people come 
into our companies without realistic notions of what 
to expect. In the competition for top talent, we have 
often tended to overplay how men will be trained 
and coached for management careers. If some of 
them get the idea that all they have to do is to put 
their careers in our hands, this is not surprising, 
especially when their educational experience has 
conditioned them to think in these terms. 

What then should we in business do about this 
situation? Several things, in my judgment. We 
should give young people a much clearer picture of 
the realities of business before they come to work, 
as well as after. We should watch out for, and make 
the most of, every man who has this self-develop- 
ment drive to begin with. But most important, we 
need to make it plain to all, by acts as well as words, 
that people must be self-developers if they are going 
to be successful managers. 

We ought not to spoon-feed information. Let 
men work on their own initiative to get it. Give 

92 



The Spark of Individuality 

them assignments that call for imagination and in- 
genuity. Make formal courses difficult and include 
a stiff evaluation of individual performance. Be 
courageous in separating those who cannot meet the 
standard. In the end this is better for all concerned. 

These ideas may seem harsh. I do not mean them 
that way. But we all know that management respon- 
sibilities take backbone. We have to have men who 
can face up to tough problems and persist in the face 
of discouragement. This kind of strength doesn't 
grow overnight. It is a long, hard process. Some 
otherwise capable people never develop it. They do 
well in subordinate spots and every business needs 
many of them. But the heavier loads do require it, 
and this must be tested from the start. Any other 
course really does a disservice both to the business 
and to the individuals concerned. 

I have commented here on several factors that 
seem to me essential in developing an effective man- 
agement group. The objective, of course, is to have 
a succession of strong, vital leaders coming along at 
all times in all branches of a business. There is never 
too much good leadership, and the best will never 
be better than the business needs. 

Closely related is a point on which I should touch 
briefly. I have in mind the man whose effectiveness 
falls off because of age, poor health, or waning in- 

93 



Vitality in a Business Enterprise 

terest, or who has not kept pace with the times. I 
suspect this problem troubles most organizations. It 
has a very considerable influence on business vitality. 
Dealing with it is surrounded with difficulties. 

Anyone who has faced this situation knows the 
emotional impact on all involved. But we also know 
that if the individual stays where he ought not to 
stay, this will reduce the organization's effectiveness 
as of right now, slow down future progress, and deny 
opportunity to younger managers who are ready and 
well equipped. 

I see two approaches, one general and one spe- 
cific. The general one grows out of the theme of 
this book. As a business builds vitality it sharpens 
the distinction between good and unacceptable per- 
formance. It is easier to deal with the poor performer 
when his shortcomings are clearly apparent. This 
enables us to build general acceptance of the idea 
that no man owns a particular job. 

The specific approach calls for the insight and 
ingenuity to find the spot where those abilities the 
man does have will be fully used and where he can 
keep his pride and self-respect. It may take some 
highly inventive and non-standard thinking to find 
the solution but the results are worth the most 
thoughtful effort. In fact, management vitality de- 
mands it. 

94 



The Spark of Individuality 

My final topic is the question of getting more 
knowledge, new knowledge, that will help us man- 
age more effectively. Perhaps, first, it is necessary to 
answer the skeptic who may ask why we should in- 
terest ourselves in getting more knowledge when 
many of us are not able to make full use of what we 
already know. 

I think the answer is plain. If a man puts a fence 
around what he wants to know, the inevitable result 
is that what he does know will serve him less and 
less. The contrary experience, and we have all felt 
it, is that as we learn, the new knowledge we acquire 
illuminates and gives fresh meaning to the things 
we knew before. I see no reason why this should not 
apply to the art of managing as it does to other 
things. It is the daily experience of vital people that 
they feel the need to keep knowing more and more. 
They are aware that if they cease to learn, the 
knowledge they have will get out of phase with the 
onrushing present. In this, as in the rest of life, one 
cannot stand still. If we do not move forward, we 
shall have to fall back. Either we grow, or we regress. 
Furthermore, even if concern for getting more 
knowledge only results in rediscovering or getting 
people to use what is already known, this in itself is 
an important gain. 

A business can develop management knowledge 



95 



Vitality in a Business Enterprise 

in many ways. Every manager at every level who 
tries new and better ways of reaching his objectives 
is creating new knowledge and experience. I have 
already described the use of temporary study groups 
and task forces to investigate current problems. This 
is another way of creating knowledge. In our busi- 
ness, still other people somewhat further removed 
from the ongoing daily activity are working hard 
to discover new knowledge that some day will help 
the business to reach new levels of attainment. Of 
course not all their efforts are successful. Sometimes 
we see how we ought to proceed only after having 
looked up several blind alleys. But this is one of the 
prices of progress. In the long run, the successes 
must substantially outweigh the failures, and it is a 
top management responsibility to make judgments 
about this. 

We are now trying in the Bell System to get new 
knowledge in some of the areas I was discussing 
earlier. To help answer questions about the initial 
capabilities of young men, and the effects of their 
early experience in the telephone companies, we 
have set up what we call The Management Progress 
Study. Each year for the past four years, we have 
taken a close look at a group of about seventy-five 
young men. Some entered the business from col- 
lege. Others are non-college employees of about the 

96 



The Spark of Individuality 

same age who have recently been promoted to man- 
agement jobs. I won't describe the tests and ap- 
praisals, but they are fairly exhaustive. All the data 
are filed with a non-profit research agency outside 
the business under an agreement that they will hold 
the information in confidence as far as individuals 
are concerned. They analyze the material and report 
only general or group findings to the business. This 
arrangement was made for two purposes. We want 
the normal, usual things to happen to the men, and 
we don't want the information to get back into the 
business and possibly influence decisions made 
about them. We also believe the men will cooper- 
ate more freely if they know the data will not affect 
their careers. 

Each year additional information about each man 
and the organization where he works is added to the 
file. We started this as a long-range study to help 
us learn how to improve our recruiting and early 
training. We didn't expect to learn anything impor- 
tant from it until a number of years had gone by. 
But we have been surprised at how quickly the mate- 
rial already gathered has begun to prod us into 
action. 

Beyond efforts aimed at immediate and current 
problems, there is of course the whole field of basic 
research in all the sciences. I have tried to suggest 

97 



Vitality in a Business Enterprise 

how the fruits of Bell Laboratories research and 
technical development have tremendous impact on 
the human organization of our business. This im- 
pact is felt everywhere, and the effect on vitality is 
profound. In the field of research into human be- 
havior, however, I think we would have to say we 
are not yet at the point where we can see tangible 
results. 

This is not from lack of interest on our part. The 
human resources of business are so important, and 
there are so many unanswered questions about them, 
that we are bound to be deeply concerned with 
whatever possibilities social science research can 
offer. To work in this field, however, involves more 
than just deciding to commit some resources. Can 
we use the same approach that has been used to 
produce so much in other branches of science? 
Or perhaps there is a better way to go about 
it? We are not yet sure, but we are trying to find 
out. 

About five years ago we established a small or- 
ganization of social scientists in the research depart- 
ment of Bell Laboratories. They have been con- 
ducting basic studies in the fields of learning, 
human communication, and group behavior. It is 
still too early to make judgments about the ultimate 
usefulness of this effort, but we are watching it 

98 



The Spark of Individuality 

closely and from personal observation I will just say 
that I am hopeful. 

More generally, my feeling is this: I think my 
business has a worthwhile and vitally important mis- 
sion. The first responsibility I have is to believe, and 
show my belief, that whatever stands in the way of 
our achieving this mission will be surmounted. If we 
are seriously lacking in any area of basic knowledge, 
we will find the knowledge. I don't know how or 
how soon, but we will find it. 

My final chapter has been about the spark of in- 
dividuality. No matter how big the organization, the 
subject of vitality always gets down to individual 
people. Vitality is not a mass aggregate with an ex- 
istence of its own. We depend utterly on the sus- 
tained competence, the creative, venturesome drive, 
and the ethical feelings of individuals. In discussing 
some of the ways a business can help its managers 
and other employees to grow in independence and 
effectiveness, I have stressed particularly four areas: 
the importance of the individual's achieving personal 
significance through his work; a broader view of the 
ethics of managing; ways of increasing managerial 
competence; and the effort to seek knowledge that 
will help management performance be the best 
possible. 

All these are intimately related to the prospects 



99 



Vitality in a Business Enterprise 

for business vigor and strength. And they all com- 
bine to give urgency to the question of how we can 
set in motion and sustain our effort to increase 
vitality in American business. 

The answer, I am convinced, is the same as the 
answer to how a business sets out to do anything 
else. Step number one occurs when the people in an 
organization sufficiently feel a need, or see an op- 
portunity, and set forth unequivocal goals. The tra- 
dition of our business is clear and conclusive on this 
point. Where we have made progress, it has been 
because we have first had the determination and in- 
genuity to state clearly the goals that would build 
our future, the goals we fully intend to reach. 

The second step is to give responsibility for reach- 
ing the goals to able, enthusiastic leaders. These 
we must have, for even men and women of the ut- 
most good will are not going to reach goals unless 
they have leadership. The very nature of a manage- 
ment organization requires that attainment of each 
major goal be given to some individual as his major 
mission. He then needs authority to get the money, 
the materials, and the people he will need. Of 
course, we will check and counsel with him, but in 
effect we say: "This is your responsibility; you stay 
with it until you make substantial progress on it." 

Then he needs support, encouragement, and rec- 
100 



The Spark of Individuality 

ognition. He needs to be rewarded when he is doing 
well. From time to time, he may need some help, if 
too many people block his way. 

Finally, if he does not make good progress and 
we are persuaded that he cannot or will not make it, 
we must make a change. As long as it is a live, im- 
portant goal, we must have a leader working at it 
who we believe can reach it, wants to reach it, and 
will reach it. The rest of the organization, particu- 
larly above him, must do the things that will help 
him. 

This is a simple formula for building vitality or 
for accomplishing anything else. But to make it 
work in all the areas where there is a need taxes the 
human and material resources of a business to the 
limit. The really big job of top management is to 
make our resources of men and money stretch so 
that we can deal as well as we should with all the 
major goals we want to reach. But our tradition is 
clear on this point, too. When we understand a 
problem sufficiently and set a clear goal, we can 
find a man to do the job and get it done. This is 
what makes the spark of individuality so vitally im- 
portant. 

I also think each of us needs to take a close look 

at himself. Whether I am a first-line supervisor or 

president, if I am concerned with vitality, I should 

101 



Vitality in a Business Enterprise 

ask, "Do I have it myself? Do I have enough of it? 
If not, what do I do to increase it?" When I have 
answered these questions and made the growth ef- 
fort the answers suggest (and there will always be 
some growth effort required if questions like these 
are faced candidly) then I will see more clearly how 
to proceed in whatever area I manage. 

We are involved in one of the great ideological 
struggles of all time. We are so deep in it that it is 
hard to see it in perspective. But essentially it is a 
contest between two quite basic concepts. One is 
that men are capable of faith in ideas that lift their 
minds and hearts, ideas that raise their sights and 
give them hope, energy, and enthusiasm. Opposing 
this is the belief that the pursuit of material ends is 
all that life on this earth is about. The future of 
American business institutions is at issue in this 
struggle. I would also say that the vitality of Ameri- 
can business may well be the decisive factor. How 
wisely we shape our goals, how skillful we are in 
leadership that brings out the best in people and 
increases their vigor, how ably we set forth our 
purposes and win respect for our efforts, these things 
are the essence of business vitality; and these can 
spell the difference. 



102 



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